SPX Options vs. SPY Options: You Must Know the Difference
SPX options and SPY options are both popular trading vehicles. Both have merits and disadvantages, so it is essential to understand and choose which option will work best for you.
There are many ways to participate in the broad equity market, and trading options on the S&P 500 is one of them. After understanding many of the similarities and differences between SPX options and SPY options, you can see what works best for your trading style.
- The fundamental difference is that SPX options are based on the $S&P 500, while SPY options are based on the $SPDR® S&P 500 ETF Trust that tracks the index. You can not buy or sell indices directly. In contrast, investors can trade ETFs freely in the open market and potentially receive a dividend every quarter, just like buying stock shares.
- The difference explains why SPX options are settled in cash (you cannot own the SPX shares) and SPY options are settled in shares once the options are exercised. Moreover, the early exercise can make sense if the dividend exceeds the option's time value for long in-the-money call option positions.
- SPY options are American-style meaning option holders can exercise their options at any time before expiration. In contrast, SPX options are European style, meaning they can only be exercised on the expiration date. As a result, index options sellers don't have any early assignment risk. For this reason, some spread traders prefer SPX options over SPY options.
Disclaimer: All trading symbols displayed are for illustrative purposes only and are not intended to portray recommendations
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Options trading entails significant risk and is not appropriate for all investors. Option investors can rapidly lose the value of their investment in a short period of time and incur permanent loss by expiration date. Losses can potentially exceed the initial required deposit. Before trading options please read the Options Disclosure Document "Characteristics and Risks of Standardized Options" which can be obtained at www.webull.com.au Regulatory and Exchange Fees may apply.
Lesson List
1
Intro to Options 101
2
Long Call Option Strategy
3
Long Put Option Strategy
4
Protective Put Option Strategy
5
Cash Secured Put Option Strategy
6
Buy Write Option Strategy
7
Covered Call Option Strategy
8
Exercise and Assignment
9
Glossary of Options
10
Option Transactions
11
The Risks of Trading Options
12
Volatility
13
Three Ways to Use Options in Your Portfolio
14
What to Know Before Trading Options?
15
GTC for Options Trading
16
Protect Your Options Positions by Using Stop Orders
17
What is an option?
18
What is an ETF option?
19
What is an index option?
SPX Options vs. SPY Options: You Must Know the Difference
21
Options Building Blocks: Pros and Cons from a Buyer’s Side
22
Quick Overview: Long Call Option Strategy
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