SPX vs SPY: Which is Better for Trading Options on the S&P 500?

When trading options on the S&P 500, there are two main ways to do it: through the SPX or SPY. Both have their pros and cons, but which one is better for you? SPX options are based directly on the index, while SPY options are based on an ETF that tracks the index. Let’s take a closer look at each option and see which one comes out on top!

What are SPX Options?

SPX options are a type of option that is based on the S&P 500 index. They are one of the most popular ways to trade the stock market, and they offer a variety of benefits that other types of options don’t have.

For starters, SPX options are European-style options, which means they can only be exercised at expiration. This gives traders more time to make decisions about their trades and eliminates the need for early exercise. Additionally, SPX options have no dividend yield, so you won’t have to worry about those payments impacting your profits or losses.

Lastly, SPX options are cash settled, which means you will not receive or owe any shares when you close out your position. Instead, you will receive or owe the difference between the price of the option and its underlying asset. This makes it easier to trade these options, as you don’t have to worry about settlement dates or shares being delivered.

What are SPY Options?

SPY options are a type of option that is based on the SPY ETF, which tracks the S&P 500 index. These options are very similar to SPX options, but there are a few key differences that you should be aware of.

For one, SPY options are American-style options, which means they can be exercised at any time before expiration. This flexibility can be helpful if you need to close out your position early for any reason. Additionally, SPY options do have a dividend yield, so you will need to take that into account when trading these options.

Lastly, SPY options are physically settled, which means you will receive or owe shares when you close out your position. This can complicate things if you need to sell your options early, as you may not be able to find a buyer who is willing to take on the shares.

What’s the Difference Between SPX and SPY Options?

There are a few key differences between SPX and SPY options that you should be aware of. The most important difference is that SPX options are European-style while SPY options are American-style. This means that you can only exercise SPX options at expiration, while you can exercise SPY options at any time before expiration. Additionally, SPY options have a dividend yield, while SPX options do not. Lastly, SPY Options are physically settled, which means you will receive or owe shares when you close out your position. This can complicate things if you need to sell your options early.

SPX vs SPY FAQ

Is SPY or SPX better?

SPY options often have a faster response time between their bid and offer than SPX options, making them more price efficient for traders and investors to trade and invest in. Because of the narrower markets in which SPY options trade, they often have better price fills than SPX options.

Is SPX the same as S&P 500?

SPX, on the other hand, is an indication of the actual S&P 500. When you check up the S&P 500 on a website, the ticker symbol for the index is SPX. Take, for example, the following snapshot from Market Watch, which shows the SPX price: However, you will not be able to purchase shares in the S&P 500, sometimes known as the SPX.