<div id="readability-page-1"><p>The lackluster performance of the Mag 7 stocks recently has had more investors looking into equal-weighted indices.An equal-weighted index gives each stock the same impact on the index’s performance, with the aim of reducing the influence of the bigger cap stocks.A capitalization-weighted index gives bigger cap stocks moreweightand smaller cap stocks less weight.That’sproblemthat the mega-cap Mag 7 stocks have on thestandardS&amp;P 500 index and the SPY.The hope is that an equal-weighted indexon those same 500 stocksmight have lower volatility and better performance than the capitalization-weighted index.</p><p>The biggest equal-weight ETF is the Invesco S&amp;P 500 RSP.RSP had a record month of investment inflows in February, which means more investors are placing bets on it.Over the past six months, the RSP has caught up to and surpassed the returns of SPY.</p><figure><div><p><img src="https://imageproxy.pbkrs.com/https://images.contentstack.io/v3/assets/blt40263f25ec36953f/blt4c7a6e987f60b88b/69a855e879f659f45f18b59a/Screenshot_2026-03-04_at_9.38.40_AM.png/query-YXV0bz13ZWJwJmRpc2FibGU9dXBzY2FsZSZmb3JtYXQ9cGpwZyZxdWFsaXR5PTUwJndpZHRoPTEyODA?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" height="598" width="1280" original-src="https://imageproxy.pbkrs.com/https://images.contentstack.io/v3/assets/blt40263f25ec36953f/blt4c7a6e987f60b88b/69a855e879f659f45f18b59a/Screenshot_2026-03-04_at_9.38.40_AM.png/query-YXV0bz13ZWJwJmRpc2FibGU9dXBzY2FsZSZmb3JtYXQ9cGpwZyZxdWFsaXR5PTUwJndpZHRoPTEyODA"/></p><figcaption>RSP &amp; SPY Performance Dec '25 - Mar '26</figcaption></div></figure>But over the past five years, SPY has consistently outperformed RSP.<figure><div><p><img src="https://imageproxy.pbkrs.com/https://images.contentstack.io/v3/assets/blt40263f25ec36953f/blte897e8addedb48b1/69a85657c7edd1509421aabf/Screenshot_2026-03-04_at_9.38.49_AM.png/query-YXV0bz13ZWJwJmRpc2FibGU9dXBzY2FsZSZmb3JtYXQ9cGpwZyZxdWFsaXR5PTUwJndpZHRoPTEyNTg?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" height="616" width="1258" original-src="https://imageproxy.pbkrs.com/https://images.contentstack.io/v3/assets/blt40263f25ec36953f/blte897e8addedb48b1/69a85657c7edd1509421aabf/Screenshot_2026-03-04_at_9.38.49_AM.png/query-YXV0bz13ZWJwJmRpc2FibGU9dXBzY2FsZSZmb3JtYXQ9cGpwZyZxdWFsaXR5PTUwJndpZHRoPTEyNTg"/></p><figcaption>RSP &amp; SPY Performance Jan '21 - Jan '26</figcaption></div></figure>Thereason whyRSP has beaten SPY recently is the underperformance of the Mag 7 stocks.<figure><div><p><img src="https://imageproxy.pbkrs.com/https://images.contentstack.io/v3/assets/blt40263f25ec36953f/blt09bd40870415dd85/69a856bd5ce4baf5070c1962/Screenshot_2026-03-04_at_9.39.04_AM.png/query-YXV0bz13ZWJwJmRpc2FibGU9dXBzY2FsZSZmb3JtYXQ9cGpwZyZxdWFsaXR5PTUwJndpZHRoPTEyNDg?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" height="224" width="1248" original-src="https://imageproxy.pbkrs.com/https://images.contentstack.io/v3/assets/blt40263f25ec36953f/blt09bd40870415dd85/69a856bd5ce4baf5070c1962/Screenshot_2026-03-04_at_9.39.04_AM.png/query-YXV0bz13ZWJwJmRpc2FibGU9dXBzY2FsZSZmb3JtYXQ9cGpwZyZxdWFsaXR5PTUwJndpZHRoPTEyNDg"/></p><figcaption>RSP out performs relative to SPY</figcaption></div></figure>But how much less volatile is RSP than SPY?<figure><div><p><img src="https://imageproxy.pbkrs.com/https://images.contentstack.io/v3/assets/blt40263f25ec36953f/bltc12a2268da88b4e4/69a857460b360ae71eb8f208/Screenshot_2026-03-04_at_9.39.15_AM.png/query-YXV0bz13ZWJwJmRpc2FibGU9dXBzY2FsZSZmb3JtYXQ9cGpwZyZxdWFsaXR5PTUwJndpZHRoPTEyNjA?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" height="550" width="1260" original-src="https://imageproxy.pbkrs.com/https://images.contentstack.io/v3/assets/blt40263f25ec36953f/bltc12a2268da88b4e4/69a857460b360ae71eb8f208/Screenshot_2026-03-04_at_9.39.15_AM.png/query-YXV0bz13ZWJwJmRpc2FibGU9dXBzY2FsZSZmb3JtYXQ9cGpwZyZxdWFsaXR5PTUwJndpZHRoPTEyNjA"/></p><figcaption>Implied Volatility RSP &amp; SPY</figcaption></div></figure><p>Only until the past18 monthshas SPY IV been consistently higher than RSP IV. That, too, coincides with the increase in IV of the Mag 7 stocks.</p><p>Drilling down into current IV data, SPY IV is about 24% higher than RSP IV. But is that all due to the Mag 7 stocks?</p><figure><div><p><img src="https://imageproxy.pbkrs.com/https://images.contentstack.io/v3/assets/blt40263f25ec36953f/bltbdf7a3efa2398438/69a857f514c2472d985740d2/Screenshot_2026-03-04_at_9.39.27_AM.png/query-YXV0bz13ZWJwJmRpc2FibGU9dXBzY2FsZSZmb3JtYXQ9cGpwZyZxdWFsaXR5PTUwJndpZHRoPTk2Ng?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" height="582" width="966" original-src="https://imageproxy.pbkrs.com/https://images.contentstack.io/v3/assets/blt40263f25ec36953f/bltbdf7a3efa2398438/69a857f514c2472d985740d2/Screenshot_2026-03-04_at_9.39.27_AM.png/query-YXV0bz13ZWJwJmRpc2FibGU9dXBzY2FsZSZmb3JtYXQ9cGpwZyZxdWFsaXR5PTUwJndpZHRoPTk2Ng"/></p><figcaption>Average IV of S&amp;P 500 Stocks</figcaption></div></figure><p>This shows that the smaller cap stocks would still contribute more volatility to an index than the larger cap stocks, while both contribute more than the middle 400.</p><p>While RSP might be less volatile and currently have better returns than SPY,there’sno guarantee that will continue.And given RSP’s optionsaren’tnearly asliquid as SPY’s,optiontraders are better served using SPY.</p><p><strong>TRADE IDEA</strong></p><p>SPY</p><p>Short 672/674 put spread April ’26 exp with 45DTE .60 credit</p><p>The war with Iran has sent shockwaves through the markets and sent volatility higher.The drop in SPY’s price recently has pushed its IV rank over 32%.If you think that SPY’s sell-off is overdone given the hopefully short-term projections for the war, and that it might either rebound or not fall too much further over the next few weeks, the short 672/674 put vertical in the April expiration with 45 DTE is a bullish strategy that collects a credit 1/3 the width of its strikes, has an 84% probability of making 50% of its $60 max potential profit before expiry vs its $140 max potential risk, and that generates $.20 of positive daily theta.</p><figure><div><p><img src="https://imageproxy.pbkrs.com/https://images.contentstack.io/v3/assets/blt40263f25ec36953f/blt934a2c54632c8489/69a85845d512680d2a3cf4ee/Screenshot_2026-03-04_at_9.39.42_AM.png/query-YXV0bz13ZWJwJmRpc2FibGU9dXBzY2FsZSZmb3JtYXQ9cGpwZyZxdWFsaXR5PTUwJndpZHRoPTEyNjA?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" height="688" width="1260" original-src="https://imageproxy.pbkrs.com/https://images.contentstack.io/v3/assets/blt40263f25ec36953f/blt934a2c54632c8489/69a85845d512680d2a3cf4ee/Screenshot_2026-03-04_at_9.39.42_AM.png/query-YXV0bz13ZWJwJmRpc2FibGU9dXBzY2FsZSZmb3JtYXQ9cGpwZyZxdWFsaXR5PTUwJndpZHRoPTEyNjA"/></p><figcaption>SPY short 672/674 put vertical in 4/17 expiration cycle, as shown in the tastytrade platform</figcaption></div></figure><strong>Tom Preston</strong>,<em>tastylive chief market strategist, is responsible for the brokerage’s trading strategy, client-facing trading software and futures trading products. He writes tastylive's Cherry Bomb newsletter. He's been trading options since 1992.</em><strong>For live daily programming, market news and commentary</strong><em>, visit</em><em>tastylive</em><em>or the</em><em>tastylive</em><em>YouTube channel.</em><strong>Trade with a better broker</strong><em>,</em><em>open a tastytrade account</em><em>today. tastylive Inc. and tastytrade Inc. are separate but affiliated companies.</em></div>

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<p>The recent underperformance of the mega-cap Mag 7 stocks has led investors to explore equal-weighted indices, which aim to reduce the influence of larger stocks. The Invesco S&P 500 RSP ETF has seen record inflows and has recently outperformed the SPY index, although SPY has historically outperformed RSP over five years. RSP is currently less volatile than SPY, but this trend may not continue. A suggested trading strategy involves a short put spread on SPY, capitalizing on its recent price drop amid geopolitical tensions.</p>

- The underwhelming performance of the Mag 7 stocks has caused investors to shift focus towards equal-weighted indices, like the Invesco S&P 500 RSP, which aims to lessen the influence of larger cap stocks.  
- Recent data shows RSP has experienced a surge in investment inflows and has matched or exceeded SPY's returns over the recent months, attributed to the Mag 7's underperformance.  
- Despite RSP's lower volatility and current better returns, SPY has historically outperformed RSP, and both indices show volatility patterns, particularly influenced by the performance of smaller cap stocks.

Cherry Picks: Why the Equal-Weight S&P 500 Is Beating the Market-Cap Index