Updated: Sep 21, 2020

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For investors interested in trading into the most widely traded index in the work, comprised of the 500 largest U.S. publicly traded companies by market capitalization, they can explore to enter and exit a position in the Standards and Poors 500 Index (S&P500)

A market index is a measure designed to allow investors to track the overall performance of a given combination of investment instruments. The listing of options on various market indexes allowed many traders for the first time to trade a broad segment of the financial market with one transaction.

ETFs, or exchange-traded funds are later developed. They essentially a marketable security that acts like an index fund (i.e. tracks the performance of market indices) but is tradable like a common stock on a stock exchange.

When using options to invest in the S&P 500 Index, you can trade an index with the ticker SPX or an exchange-traded fund (ETF) with the ticker SPY. The SPX and SPY options are great tools to use when an investor wants to profit off an increase or decrease (directional moves) in the S&P 500 index. These options are ideal for trading because both are very liquid with high trading volume, making it easy to enter into and exit a position. Choosing between the SPX and the SPY option is entirely up to the investor to decide which would fit their investing strategy.

When comparing between SPY versus SPX, the first may have more volume, but the second has more value.

Definition of SPX

SPX, or the S&P 500 Index, is a stock index based on the 500 largest companies listed on the New York Stock Exchange (NYSE) and Nasdaq. The individual company's market capitalization (cap), its share price multiplied by the number of outstanding shares, is used to determine its size. Unlike the Dow Jones Industrial Average, an index composed of an equal number of shares (adjusted for stock splits) of each of the 30 companies, SPX is a capitalization-weighted index.

The weight of a company in the index in equivalent to the market cap of that company as percentage of the total market cap of all companies in the index. For example, if an index has a total market cap of $100 billion and one company has a market cap of $1 billion, its weight would be 1%. The underlying asset itself does not trade, and it has no shares available to be bought or sold. SPX functions as a theoretical index with a price calculated as if it were a true portfolio with exactly the correct number of shares of each of the 500 stocks.

So, while the SPX itself may not trade, you can trade with its futures and options.

The market capitalization of most stocks changes daily, and the list of the 500 specific stocks in the index is rebalanced quarterly every year in March, June, September, and December

Definition of SPY

SPY is the ticker symbol for the SPDR S&P 500 ETF. The SPY portfolio seeks to provide investment results that mimic the price and yield performance (before expenses) of the S&P 500 Index. When buying or selling the shares on an exchange, the transaction price of SPY reflects that of SPX, but us not an exact match as the market determines its price through an auction like every other security.

Size Comparison:

The SPDR S&P 500 (NYSE symbol SPY) is the most widely traded contract on option exchanges. The SPX S&P 500 index options have far lower trading volume, but each contract is ten times the size of a SPY. Each SPX point equals $100. For example, let's say SPX was at 3,180 points, and SPY traded near $318 One at-the-money SPX option gives its owner the right to buy $318,000 worth of the underlying asset ($100 x 3,180). One SPY option gives its owner the right to buy $31,800 worth of ETF shares (10% of $318,000). If you trade multiple options,, it might make more sense to same commission fees to trade 10 SPX options rather than 100 SPY options.


ETF options have a single underlying but index options do not. The SPY options have the SPY fund as their underlying, while the SPX options are based on the S&P 500, the 500 stocks that compose the index. So you cannot trade the underlying to hedge the options, but there are clearly proxies that can used.

For this reason, index options are cash-settled, as opposed to settled in the underlying stock. So you will have cash if you end up with ITM SPX call options at expiration, while if long SPY calls, you will receive SPY stock instead.


SPY pays a quarterly dividend, traders with in-the-money (ITM) call options often exercise them so that they can collect the dividend. It is important to be alert when trading ITM calls for SPY as most such calls are exercised for the dividend on expiration Friday. If you own such options, must know how to decide whether or not to exercise. If exercise before expiration, you will lose this dividend. There is no issue for SPX as they do not pay dividends.


SPY options are American style and may be exercised at any time before they expire. SPX options are European style and can be exercised only at expiration date. With the different styles, trading ceases at different times. SPY options cease trading at the close of business on expiration Friday.

All SPX options, except for those that expire on the third Friday of the month, expire like SPY options, at the close of business on expiration Friday. SPX options that expire on the third Friday stop trading the day before the third Friday. On the third Friday, the settlement price for the expiration cycle, is determined by the opening prices of each of the stocks in the index.

Other differences:

Index options-on electronic platforms (for e.g. SPX) can result in wider bid-ask spreads. Recently, while the SPY may have calls had a $31.20/$32.00 bid/ask spread, the May 132 SPX calls had a $3.46/$3.50 bid/ask. The SPY and the SPX do not always trade in perfect unison. For example, SPX closed recently at 3,185.04 points, while SPY closed at $317.59. Underlying the SPY contract is the ETF and the price fluctuates based on buyers and sellers of the ETF. ETFs has turnover as it buys and sells shares, based on the movements of the capitalizations of all the constituent companies. SPY itself has a turnover of about 3.54% per annum. At any given time, the makeup of the index will be different from the fund as trades take time to execute. Underlying the SPX are the actual 500 stocks composing the S&P 500 Index. So the SPX value is determined directly by the value of those 500 stocks. ETFs also have small fund expenses; the fund takes out 0.09% of all holdings every year to cover its management costs (and make a profit).


SPX: S&P500 stocks

SPY: ETF tracking the S&P500 index


SPX: SPX option with the same strike price and expiration date compared to SPY option is approx. 10 times the value of SPY option

SPY: SPY option with same strike price at expiration date compared to SPX option is approx. 0.1 times the value of SPX option


SPX: n/a

SPY: Fund Management Fees


SPX: None

SPY: Quarterly Expiration (3rd Fri of Mar, Jun, Sep, Dec)


SPX: European Style Option

SPY: American Style Option

Ceases Trading

SPX: Most SPX options expire at close of business on expiration Friday. Some SPX options that expire on 3rd Friday stop trading day before the 3rd Friday.

SPY: At close of business on expiration, 3rd Friday of month.


SPX: Cash. underlying asset is not traded

SPY: Stock. underlying asset is traded

You are welcome to checkout our webpage EVERYDAY TRADING WON at and We provide education in stock investment, and trading in options and futures.

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