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Definition: Spiders (SPDR)
The Standard and Poor’s Depositary Receipts or spiders are Exchange Traded Funds (ETFs) that represent investor ownership in a trust called the SPDR Trust. The SPDR Trust is a unit investment trust, i.e. a fund offering a fixed portfolio of securities that is unmanaged and that have a definite life. SPDR closely tracks the S&P’s 500 Index and is useful for individual investors as it trades at 10% of the S&P 500 index. Each share SPDR is representative of one-tenth of the S&P 500 index and as such, it trades at 0.1 times the dollar value of the S&P 500 index. SPDRs or spiders trade on the Ney York Stock Exchange. The ticker symbol for the same is SPY.
SPDRs are useful for large investors as it can be used to predict the direction in price movements of the broad U.S. market. Investors can follow a passive management strategy by investing in SPDRs as each unit is representative of the overall index. This type of investment is called indexed investing. SPDRs differ from mutual funds in that SPDRs have a fixed number of unmanaged shares that are traded in the open market. However, SPDRs are vulnerable to potential fluctuations in the index tracked by them. Also, investors may lose out on higher profits from active fund management techniques.
As SPDRs represent investor ownership in the SPDR trust, SPDR holders are entitled to certain voting rights. SPDRs are purchased or redeemed at the net asset value.