Difference between spy and $spx

I have observed a difference between spy and $spx everyday. Say for example when spy = 122.85, $spx is 1223.87.

Isn't spy is 1/10 of $spx? There seems to be a 5 pt difference. Can anyone explain the reason?

 

SPY is an index-tracking ETF, but that doesn't mean it will track it perfectly 100% of the time. XSP is exactly 1/10th of SPX.

Also don't forget the management fee in SPY.

 

Does it mean that the price of ETF (SPY, DIA, IWM etc) is lower than the corresponding index by a fixed percentage?

 

The fees are a fixed %, but the two don't have to follow each other exactly. So the difference is not always fixed.

 

Indices (e.g. SPX) and their derivatives (e.g. SPY, SP/ES futures, SSFs, etc.) all move around a little, depending on who's buying/selling size where and when. Arb programs keep them within a few ticks of each other. There are also reasons for slight premiums/discounts in the relationships, like transaction/creation/redemption costs, interest rates, dividends, distributions, etc.

The common wisdom is that the futures action usually drives the other stuff (including the cash, via arb program buying in the component stocks).

Reverre's "The Complete Arbitrage Deskbook" is a decent reference for this stuff.

 

welcome to arbitrage.

 

Also SPY will have accrued dividends in it, too.

 

Is there a theoretical price of ETF?

 

for options, you can sell SPY and buy mini SPX. the difference being one's american and the other european.