The advantage of trading XSP options over SPY options

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earth_imperator

The advantage of trading XSP options over SPY options

XSP and SPY are similar in valuation: 1/10 of the SPX
The main differences are: XSP is Cash Settled and of European Exercise Style,
whereas SPY is Physical Share Settled and of American Exercise Style.

What this practically means for the options trader:
With XSP options you don't need to have a ton of cash to buy the underlying
as everything is cash-settled, ie. you get the cash difference, no stock shares.
And: when shortselling the XSP option there is no "Early Assignment risk",
b/c European Style means Early Assignment is not possible.

Here's official info on XSP, incl. links to the official prospectus covering all info:
https://www.cboe.com/tradable_products/sp_500/mini_spx_options/

See also this link on the above page:
https://www.cboe.com/insights/posts/why-option-settlement-style-matters/

And this for an official detailed summary of the above said:
https://www.cboe.com/insights/posts/why-trade-xsp-vs-spy-a-breakdown-of-the-benefits/
 
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Yes, but what is the advantage of trading XSP over SPX?

When they cut the value of the index to ten percent, the final digit gets rounded up or down.

At settlement, that can work for or against you. I suppose statistically it will even out over time. But I still find it kind of annoying.

But why would you trade XSP instead of SPX?

Unless you are working with very small amounts of capital, I don't see a benefit.

And the commissions, as a percentage of the entire position cost, will be higher.
 
@BMK, my posting is about trading the XSP options, not the underlying XSP itself, nor the SPX or SPX options.
It compares XSP to SPY, not to SPX.

Are you saying you trade SPX?
100 shares of SPX does require a cash or margin of about $437,259.00 :)
I think 99+% of traders don't have that much capital at their hand.

Better you tell us why you prefer SPX over XSP, from your experience.
 
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I was also referring to the options.

I'm not sure what you mean when you refer to the underlying, or when you ask if I "trade SPX."

You cannot buy 100 shares of SPX or XSP. They are underlying indexes, and there is no underlying security that can be bought or sold.

You don't need $400K in capital to trade SPX options.

Yesterday I sold a vertical call spread in SPXW.

I sold the 4430 call and bought the 4435 call for a net credit of $.30 (30 cents).

I did four contracts on each leg.

The max loss on the position was $1880.00, not accounting for commissions and fees.

$1880.00 is the amount you need to establish that position.

If you have that available...

Why would anyone trade 40 contracts of XSP instead?

And how would it even be possible?

In XSP options, the strikes are 443 and 444. Without a strike of 443.50, you cannot establish the same position.
 
@BMK, I can only repeat: the OP was a comparison of XSP to SPY, not to SPX.
I think SPX and XSP are very similar to each other, the only difference seems to be that XSP is just 1/10 of SPX, but other than that they both share all the same other properties like CashSettled, EuropeanStyle etc.

BMK said:
You cannot buy 100 shares of SPX or XSP. They are underlying indexes, and there is no underlying security that can be bought or sold.
More...
You sure? Why then has SPX a volume?... :-)
Proof: see here https://finance.yahoo.com/quote/^SPX?p=^SPX
 
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GATT said:
of course you can buy and sell SPX ...
More...

SPX is an index. It is not a stock, or an exchange-traded fund, or anything that can be bought or sold. It is a mathematical construct. It is not a security.

If you believe that it is a security, then please identify the issuer, the number of shares currently outstanding, and post links to that information.

earth_imperator said:
Why then has SPX a volume?...
More...

The volume that appears on that Yahoo page is ten digits. That's 2 billion shares traded yesterday, and average volume of 4 billion shares.

Those are all the shares traded of the companies that make up the index.

You cannot buy or sell an index.

If you can, post a screenshot from your broker of what the order would look like.

Screenshot 2023-06-15 at 09-46-13 Charles Schwab.png
 
earth_imperator said:
@BMK, I can only repeat: the OP was a comparison of XSP to SPY, not to SPX.
I think SPX and XSP are very similar to each other, the only difference seems to be that XSP is just 1/10 of SPX, but other than that they both share all the same other properties like CashSettled, EuropeanStyle etc.
More...

Fair enough. But I am asking a different question:

Why would anyone with sufficient capital choose to trade XSP options instead of SPX options?

What advantage is there? And why would you want to pay more commission? You can establish the same position in SPX options with fewer contracts, and therefore lower commissions.
 
BMK said:
SPX is an index. It is not a stock, or an exchange-traded fund, or anything that can be bought or sold. It is a mathematical construct. It is not a security.
More...

OMG, it was a JOKE !!
This is the only way you can handle this imperator fool.
 
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