spx - why is cash settled an advantage?

[beerntrading]

Advantage of SPY vs SPX

• Smaller contract, so better for smaller retail accounts
• Not cash settled-if for a hedge, you don't lose your hedge
• Very liquid with narrow spreads
• More retail order flow
• Pays dividend

You're missing the biggest one (for me) about American style exercise. You always have parity / physical delivery as a backstop of value in a fast market. Anyone who's ever watch the spread on their position go to 4x the bid know the value in this one.

And it's reasonable to argue that the SPX is actually better for smaller retail accounts because you're not getting dinged twice for the fees...or that the SPY is bigger for large player because they do get dinged twice on the rebate. (Not that I disagree with your reasoning--but just for completeness.)

 

[Abundance Magnet]

You're missing the biggest one (for me) about American style exercise. You always have parity / physical delivery as a backstop of value in a fast market. Anyone who's ever watch the spread on their position go to 4x the bid know the value in this one.

And it's reasonable to argue that the SPX is actually better for smaller retail accounts because you're not getting dinged twice for the fees...or that the SPY is bigger for large player because they do get dinged twice on the rebate. (Not that I disagree with your reasoning--but just for completeness.)

So... With all these nuances is there somewhere to learn about them? Seems there's a bunch of stuff that one would only learn from working in the industry. But for those if who trade individually, it seems we are in a knowledge gap... Any thoughts or suggestions?

 

[Abundance Magnet]

You're missing the biggest one (for me) about American style exercise. You always have parity / physical delivery as a backstop of value in a fast market. Anyone who's ever watch the spread on their position go to 4x the bid know the value in this one.

And it's reasonable to argue that the SPX is actually better for smaller retail accounts because you're not getting dinged twice for the fees...or that the SPY is bigger for large player because they do get dinged twice on the rebate. (Not that I disagree with your reasoning--but just for completeness.)

Could you expand? Why would the wide spreads affect SPX? Eventually the spreads get back to reasonable amounts...