[bcit-cst]

One thing I am trying to understand . lets say there is a super flash crash and take Acme INC

Day 1: (before crash) price : 200$ S&P 500 weight : 2%

Day 2 :next day market crashes. Acme is very low volume so price crashes to 1$ .

what happens next ? do all the EFT that follow S&P have to sell all ACME for 1$ because it is not in the S&P 500 anymore.

Day 5 : ACME jump back to 200 $ and is back in the S&P 500.

So my question is what would have happen to a passive investor. if he bought 1000$ worth of ETF right before the crash. Will he still have a 1000$ dollars at the end of it .

[holdenc]

The S&P reconstitutes itself four times a year. But, imagine that your scenario worked anyways -- the investor would have less than $1000 since the S&P index missed the recovery of Acme Inc. But considering the largest constituent of the S&P (MSFT) is only around 4% of the index total weight, the impact of Acme Inc's price decline would not be great.

[thoughtstheseus]

Index changes don’t happen like that and a drop that large would freeze trading.

[badfrog]

There is no market rule that prevents a single stock from dropping 99% in a day. LULD only halts trading for a few minutes, then there's an auction that could result in any price.