SPX vs SPY - your experience with trading them?

A

Abundance Magnet

Hi

So I'm looking at trading SPX options instead of SPY options. I've done research in comparing them. What have been your experiences in trading the two? What did you learn when you started trading SPX compared to SPY?

Anywhere to get more research and reading material on trading SPX?
Thanks
 
A few comments:
1) SPX is 10X SPY (good for commissions)
2) SPX is European style (Good: no early assignment)
3) SPX spreads are wider (not so good, but should not be huge issue).
4) SPX is index and has no discrete point Dividend action (good).
5) With SPY you can trade the underlying to manage your position, but you are unable to directly trade SPX underlying -- buy 10SPYs or 2 ES's, but still not directly comparable)

A side note: typically SPX also has exchange fees that may impact your commissions (TDA eats these for most cases, so you should double check your case) Exchange fees are typically an additional 65cents (guesstimating from poor memory) - so may swamp your expected transaction costs. --
 
Abundance Magnet said:
Hi

So I'm looking at trading SPX options instead of SPY options. I've done research in comparing them. What have been your experiences in trading the two? What did you learn when you started trading SPX compared to SPY?

Anywhere to get more research and reading material on trading SPX?
Thanks
More...

SPX is not as liquid as SPY i.e. the bid/ask spread is lot wider than SPY options and it could a long time to get a fill whereas SPY options are lot more liquid due to the high volume.

SPY options also has more expiration dates so it's more flexible in rolling and less risky for shorting.

But then again SPX options is cash-settled European options so the risk for early-exercise for option writer is relatively smaller and no hassle of receiving the underlying at settlement

Finally SPX is more expensive than SPY so needs higher capital than SPY to earn an equivalent return but then again SPX option is price movement is higher in response to the underlying price change

Overall SPY options is better and easier to trade than SPX options I find unless you have very large capital
 
JSOP said:
SPY options also has more expiration dates so it's more flexible in rolling and less risky for shorting.

Finally SPX is more expensive than SPY so needs higher capital than SPY to earn an equivalent return but then again SPX option is price movement is higher in response to the underlying price change
More...

I do not know what you are saying.

SPX has Monday Wednesday and Friday expiries ... it seems the same for SPY from a casual browsing of expiry dates.

Also see this (the appear superficially same): http://www.cboe.com/products/weeklys-options/available-weeklys

Re more expensive ... why? SPX = 10 times SPY. So if you trade 10 contracts in SPY, you will trade just 1 in SPX. Apart from ETF tracking error, they move pretty much same percentage points.

And SPX is the most liquid index option ... most liquid of anything traded in US index options. Dollar for dollar it seems to be traded more than SPY: https://www.optionseducation.org/tools/todays_most_active_options.html
 
harryp said:
I do not know what you are saying.

SPX has Monday Wednesday and Friday expiries ... it seems the same for SPY from a casual browsing of expiry dates.

Also see this (the appear superficially same): http://www.cboe.com/products/weeklys-options/available-weeklys

Re more expensive ... why? SPX = 10 times SPY. So if you trade 10 contracts in SPY, you will trade just 1 in SPX. Apart from ETF tracking error, they move pretty much same percentage points.

And SPX is the most liquid index option ... most liquid of anything traded in US index options. Dollar for dollar it seems to be traded more than SPY: https://www.optionseducation.org/tools/todays_most_active_options.html
More...

Ok I was not aware of the Monday, Wednesday expiration date as well for SPX. I thought it's just a regular weekly option.

SPX might be the most liquid index option but it is NOT as liquid as SPY options. Its bid/ask spread is at least 0.10 if not more even on its more liquid weeklies whereas SPY options is much more liquid in that its bid/ask spread is typically 0.01.

And SPX given that it's 10X of SPY IS more expensive!! Not everybody has the portfolio size to buy 10X SPY.
 
I just want to add that in a PMA, you can hedge SPX options with SPY and get a margin offset.

I'll make 2 general statements that will not apply to everyone.

  1. For smaller retail accounts or for those with less option experience, I would stick with SPY.
  2. For larger retail or institutional accounts that qualify for a PMA, where the trader has more option experiance, I would only trade cash settled index options.
 
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