Yesterday morning, the announcement came that DoorDash (NASDAQ: DASH) would be added to the S&P 500.
That is huge news for a stock.
Now, DASH won’t officially join the index until March 24th, but the hype always begins way before that.
Good thing our Breaking News Chat service caught it early yesterday morning so we could start watching it before the big day.
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Here’s how it works:
Two veteran Wall Street analysts with decades of combined experience monitor all the news feeds out there.
Then they cut through all the fluff…
It’s about narrowing it down to only the information with the potential to move stocks.
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When a stock gets added to the S&P 500, it’s like getting called up to the big leagues.
It means the company has proven itself, met strict criteria, and now earns a spot in the world’s most-watched index.
For traders and investors, this is huge…
And if you understand how it impacts price action, you can use it to your advantage.
Table of Contents
What Is the S&P 500 and Why Does It Matter?
The S&P 500 (Standard & Poor’s 500) is an index of 500 of the largest publicly traded U.S. companies.
It’s the gold standard for measuring the stock market’s overall health.
When people say “the market is up today,” they’re usually talking about the S&P 500.
To get added, a company must meet certain requirements, including:
- A market cap of at least $14.5 billion
- Consistently profitable over recent quarters
- Sufficient liquidity and trading volume
- Primarily U.S.-based business operations
It’s not just about being big—it’s about meeting strict financial and operational criteria.
Now you see why I always say that penny stocks don’t care about what the broad market is doing…
Penny stock companies are vastly different from what’s included in the S&P 500 and trade very differently, making them great for day trading!
What Happens Before and When a Stock Gets Added?
The announcement of a stock being added, like yesterday’s with DASH, sets off a chain reaction that can dramatically impact the stock price.
This often leads to a sharp pre-addition rally, where the stock jumps in price before it even officially joins the index.
Big Buying Pressure from Index Funds:
The biggest reason stocks pop when they join the S&P 500? Funds are forced to buy them.
This creates massive demand, driving the stock price up.
And it’s not just index funds—institutional investors pile in too, betting on the stock’s long-term growth.
Increased Trading Volume & Liquidity:
Once a stock enters the S&P 500, trading volume spikes because of its increased visibility.
More funds hold the stock, more analysts cover it, and more investors trade it daily.
This increased liquidity makes entering and exiting positions easier, which is why many stocks see less volatility over time after joining the index.
S&P 500 Additions That Moved the Market
Let’s look at some stocks and how they reacted to joining the S&P 500…
Tesla Inc. (TSLA) – December 2020:
- TSLA jumped over 50% from announcement to official inclusion.
- Massive buying pressure from funds led to record volume.
- After joining, the stock experienced a slight pullback, then continued long-term growth.
Airbnb Inc. (ABNB) – December 2023:
- The stock rallied 15% in the weeks before joining the index.
- ABNB experienced profit-taking right after inclusion but recovered.
Yesterday, DASH moved up and then sideways,, even after the S&P 500 announcement.
However, keep in mind that this happened on a day when the broad market was down.
DASH Intraday, 1-Minute Candles Chart; SteadyTrade
I expect the price to gradually move higher as we approach the inclusion date.
How to Trade a Stock Being Added to the S&P 500
Now that you know what happens, how can you trade it profitably?
Trade the Pre-Addition Hype:
Many stocks rally between the announcement and the official inclusion date.
If you can catch the momentum early, there’s often a solid swing trade opportunity.
Watch for Post-Addition Dips:
Sometimes, after the stock is officially added, we see profit-taking and a dip.
This can be a great chance to get into the stock at a reasonable price.
Look for Increased Option Activity:
S&P 500 additions often cause big moves in the options market.
Watch for unusual volume in calls and puts to spot potential moves.
Obviously S&P 500 stocks are not in the budget for every investor.
That’s why trading options is a great alternative. They allow you to enjoy the price action of the higher-priced names without actually buying the stock.
And it’s not as scary as you might think. Check out my blog post to learn how.
Use the Right Tools:
To track and trade pre-inclusion stocks like DASH, you need a great trading platform.
I use StocksToTrade every single day. It’s got all the real-time data, charts, and tools you need to stay ahead of the game.
PLUS, right now, you can get two weeks of both the STT platform and our Breaking News Chat service for $17.
Grab your 14-day StocksToTrade + Breaking News Chat trial today for only $17!
My Final Thoughts…
Getting added to the S&P 500 is a major milestone for any company.
It means:
- Big buying pressure from funds
- Higher trading volume & liquidity
- More institutional & retail investor attention
- Potential long-term growth opportunities
For traders, this creates predictable patterns that can lead to profitable trades…But you have to know what to look for.
So next time you hear a stock is being added to the S&P 500, don’t just watch from the sidelines. Know the playbook and get ready to trade.
For more trading mentorship, strategies, and advice, join my StocksToTrade Advisory service.
You’ll get a monthly newsletter with a list of my top picks, three weekly videos with my watchlists, bonus reports, and more.
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Have a great day, everyone. See you back here tomorrow.
Tim Bohen
Lead Trainer, StocksToTrade