This might be a simple question, but is there any difference between SPY and SPX LEAPs Is there any difference between QQQ and NDX LEAPs? I heard somewhere that the returns for SPX LEAPs are better than SPY LEAPs but I have no idea if this is true or not
They both track SP500 and Nasdaq 100, but SPX and NDX are "Euro-style" cash settled. No early exercise. This will affect pricing.
No difference between LEAPs and non-LEAPS on anything. The main differences not related to LEAPs may be in taxation of index options vs non-index. It’s better when trading indexes. Also, you’ll pay higher commissions and get little worse pricing/slippage when trading 10 SPY options or combos vs single SPX that equals 10x SPY.
Along with the lower commissions and better fills with the larger SPX & NDX, vs. SPY & QQQ, the tax advantages, as guru alludes to, can be significant. Non-equity options (which includes equity index and future options) are subject to the 60/40 rule....where 60% of your net trading profits are subject to 20% long-term capital gains. Let's say you net $1M in trading profits for the year. If you were trading only SPY or QQQ equity and options your income tax bracket is 37% and you'd pay $370k in Federal taxes. If you were trading only SPX (or ES) options (and maybe delta hedged occasionally with ES futures) your Federal tax bill subject to the 60/40 rule is as follows: - You only pay 20% long-term capital gains on 60% or $600k of the $1M = $120k - You pay regular Fed taxes, say 35%, on the remaining 40% or $400k = $140k - Total Federal taxes: $120k + $140k = $260k (or 26%) In total, if you net $1M in trading profits, you save $110k in Federal taxes trading SPX, ES, or NDX vs trading SPY or QQQ. $110k gets you an entry level Porsche 911 Carrera.
I forgot to add that you can trade SPX options at night, starting at midnight PST / 3am EST. This is very helpful when wanting to catch market fluctuations before it opens for everyone else, like those trading SPY options.
If you're a real trading addict/degenerate you can trade the E-mini S&P 500 ES options and futures from 6pm to 5pm (EST) Sunday thru Friday with only a 15 minute break (4:15pm - 4:30pm)....that's almost 23 straight hours in front of the screen. A number of S&P index MM prop groups trade around the clock with the SPX as the flagship product, ES as the main hedging instrument...and OEX, SPY, micro E-minis, and VIX options as satellite products. Probably an 8+ man operation with a minimum of $5M in capital to "make it rain."