spx vs spy options

Discussion in 'Options' started by torontoman, Feb 16, 2007.

  1. Why are people selling spy options when spx options have better premiums? I must be missing something.

    Your comments would be appreciated.


  2. Maverick74


    The premiums are the same, just different multiple.
  3. Thank you for your reply Maverick.

    The 1490 Mar spx call sells for 2.00.
    The 149 Mar spy call sells for....Oh. I see what you mean.

    Out of the two, what would you suggest for credit spreads?


  4. Maverick74


    One is not better then the other per se. The reason people stay away from cash index options is because of the settlement. It's a crapshoot. With the ETF, you know what you are getting as they expire Friday on the close.

    I've seen some SET's in SPX 10 to 15 handles higher then the previous close only for the market to open no where near those levels and selloff the rest of the day. Does this happen often? No, not really, but it will happen at least once a year, maybe twice. Is that worth it? That's up to you to figure out.

    You will have to offset that with the slightly higher commissions you'll be paying by buying more contracts. Also, the spreads are going to get better on the ETF's with penny pricing. Q's and IWM already have them so I'm sure SPY is right around the corner. Penny wide spreads are much better then what you see on SPX. I don't think cash index options will have penny pricing for quite a long time.
  5. kevin107


    Is there a difference in tax treatment of gains in SPY options vs SPX options?
  6. Maverick74


  7. wait...I thought index ETF based options were not treated the same tax wise as the index options....is SPY an index ETF based option like QQQQ?

    i think they said index options are 60 long term/40 short term and equity options (including index ETF based options) are not. that being said, i havent looked to see which group SPY belongs to
  8. Maverick74


    No such definition exists. They are both classified under the 1256 tax law which includes all broad based index options. This includes cash, equity and futures options. As long as the index falls under their definition of broad based, they get 1256 tax treatment. However, as a disclaimer, consult your accountant for any matters regarding your taxes. My advice is for entertainment purposes only. LOL.
  9. Besides what's already been said, I trade SPY because it's electronically routed - quicker, and tighter bid/ask spreads. SPX is still open-outcry, with spreads wide enough to drive Mark Haines through. Example:

    SPX Apr 1390 Calls 30.40 34.40
    SPY Apr 139 Calls 4.10 4.30

    The SPY spread is 4.6% of the ask
    The SPX spread is 11.6% of the ask

    When you're in a hurry to close one leg of a condor or something, you don't want to be fighting with the SPX market-maker for a decent price.
  10. I have to agree about the spreads on SPY options - much better than on SPX or OEX. I've been trading the latter but just switched over to SPY's, because, with the spreads so wide, I was really getting hurt on my fills. With those spreads, it's very difficult to get in on limit orders. I found the only way I could get filled anywhere in the neighborhood of where I wanted was to use a market "on touched" order. The slippage was really digging into my profits - and exacerbating my losses.

    #10     Apr 2, 2007