SPY/SPX LEAPs

K

keroppi

This might be a simple question, but is there any difference between SPY and SPX LEAPs

Is there any difference between QQQ and NDX LEAPs?

I heard somewhere that the returns for SPX LEAPs are better than SPY LEAPs but I have no idea if this is true or not
 
No difference between LEAPs and non-LEAPS on anything.

The main differences not related to LEAPs may be in taxation of index options vs non-index. It’s better when trading indexes.
Also, you’ll pay higher commissions and get little worse pricing/slippage when trading 10 SPY options or combos vs single SPX that equals 10x SPY.
 
Along with the lower commissions and better fills with the larger SPX & NDX, vs. SPY & QQQ, the tax advantages, as guru alludes to, can be significant. Non-equity options (which includes equity index and future options) are subject to the 60/40 rule....where 60% of your net trading profits are subject to 20% long-term capital gains.

Let's say you net $1M in trading profits for the year.

If you were trading only SPY or QQQ equity and options your income tax bracket is 37% and you'd pay $370k in Federal taxes.

If you were trading only SPX (or ES) options (and maybe delta hedged occasionally with ES futures) your Federal tax bill subject to the 60/40 rule is as follows:

- You only pay 20% long-term capital gains on 60% or $600k of the $1M = $120k
- You pay regular Fed taxes, say 35%, on the remaining 40% or $400k = $140k
- Total Federal taxes: $120k + $140k = $260k (or 26%)
​
In total, if you net $1M in trading profits, you save $110k in Federal taxes trading SPX, ES, or NDX vs trading SPY or QQQ. $110k gets you an entry level Porsche 911 Carrera.
 
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Tesla Model S! :cool:

VolSkewTrader said:
Along with the lower commissions and better fills with the larger SPX & NDX, vs. SPY & QQQ, the tax advantages, as guru alludes to, can be significant. Non-equity options (which includes equity index and future options) are subject to the 60/40 rule....where 60% of your net trading profits are subject to 20% long-term capital gains.

Let's say you net $1M in trading profits for the year.

If you were trading only SPY or QQQ equity and options your income tax bracket is 37% and you'd pay $370k in Federal taxes.

If you were trading only SPX (or ES) options (and maybe delta hedged occasionally with ES futures) your Federal tax bill subject to the 60/40 rule is as follows:

- You only pay 20% long-term capital gains on 60% or $600k of the $1M = $120k
- You pay regular Fed taxes, say 35%, on the remaining 40% or $400k = $140k
- Total Federal taxes: $120k + $140k = $260k (or 26%)
​
In total, if you net $1M in trading profits, you save $110k in Federal taxes trading SPX, ES, or NDX vs trading SPY or QQQ. $110k gets you an entry level 911 Porsche Carrera.
More...
 
I forgot to add that you can trade SPX options at night, starting at midnight PST / 3am EST.
This is very helpful when wanting to catch market fluctuations before it opens for everyone else, like those trading SPY options.
 
If you're a real trading addict/degenerate you can trade the E-mini S&P 500 ES options and futures from 6pm to 5pm (EST) Sunday thru Friday with only a 15 minute break (4:15pm - 4:30pm)....that's almost 23 straight hours in front of the screen.

A number of S&P index MM prop groups trade around the clock with the SPX as the flagship product, ES as the main hedging instrument...and OEX, SPY, micro E-minis, and VIX options as satellite products. Probably an 8+ man operation with a minimum of $5M in capital to "make it rain."
 
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