S&P 500 Index Options

Discussion in 'Options' started by thejoker67, Mar 21, 2007.

  1. Between SPX and SPY, which is better to do iron condors with?

    Considering SET, commissions and liquidity, I think SPX is better eventhough it's higher commissions.

    Any other opinions?
  2. MTE


    There was a discussion on this not that long ago, try searching for it.

    The advantage of SPX is bigger size, which means higher premium for OTM options. For example, an option trading at 0.05 in SPY would be equal to 0.5 in SPX. So clearly SPY options lose the pricing flexibility at the OTM strikes due to the 0.05 tick size. Also, as a result you'd have lower commissions for trading the SPX iron condor than the equivalent-exposure SPY iron condor cause you'd have 10x less contracts (i.e. 1-contract SPX iron condor is the same as 10-contract SPY iron condor, so it's 4 contracts vs. 40).

    Liquidity is good in both, but due to the size of SPX the bid/ask spreads seem outrageous, but don't forget 0.1 in SPY equals 1 in SPX.

    The SPX settlement is a bit of a pain, but it's European and cash-settled, which can be an advantage.

    Overall, I'd say it's more a matter of preference, maybe with some exceptions.
  3. If you're starting out - SPY.

    If you've been at it for a while and throwing around 20+ SPY contracts to a side is boring to you - SPX might be worth a look.