Looking at ways to manage sizes, since SPY is supposed to be a 10th of SPX I went to have a look at the mini-SPX --> XSP I prefer to trade the SPX directly just because I am used to it. But looking at it, it seems that XSP might be a good one to fraction sizes. https://www.cboe.com/tradable_products/sp_500/mini_spx_options/ - SPY is exercised into shares of the ETF, which is something I don't prefer. - XSP is cash settled. European Style. Settled only at expiration. Having XSP available looks to me that SPY is redundant for most of us. What do you guys think? Anyone in favor of SPY over XSP?
Fair point, but ETFs normally account commissions in the price directly. Is that not making both products on equal terms?
I don't know. All I know is that when I trade SPY I do it commision free. Usually limit order. I don't get concerned about a penny here or there. I guess I don't get the leverage that the mini's have but leverage works both ways.
XSP's got horrible liquidity hence very large bid/ask spread and you won't get good fills. SPY on the hand is extremely liquid with much tighter spread plus it's got options with daily expirations so it offers lot more flexibility. Plus SPY pays dividends. So I prefer SPY.
I went to take a couple of screenshots, prices are from the last close, they are static now. If we look at the 569 strike for example, marked with the label, we can see that: - Expirations are exactly the same, so we can scratch that out from the battle. - It is true that SPY has more liquidity. A lot more. - Also true that the spread is tighter for the SPY. I guess that will be beneficial depending on the strategy. - If you are writing, XSP seems to be more appealing, you would get a bit more premium for your chips. Liquidity is not really an issue for me since if one qualify to manage more than ten contracts they can move to the SPX market. I don't mind that they pay dividends on the SPY because I am aiming to be flat at expiry. Good exercise, I guess it comes down to preference. I wanted to find out the best one, but there is an element of preference here.
And one more thing, XPS, regardless of how it is, is still an option, a derivative so everything is higher and only one thing lower, higher commission, higher margin but lower amount of time to realize your potential profit goal due to the time decay. Whereas SPY is an underlying, everything lower, lower commission, lower margin, and zero time decay. Pricing of XPS is also lot more complicated because it's an option. So for all the complexities and the cost, you might as well go with SPX for bigger rewards.
That might be me shitting on the English language, since we are in the options subforum I meant SPY options vs XSP options. I was talking about options all along, hence my two screenshots comparing strikes. I see what you mean now.
OMG!!! That would make more sense cuz otherwise the SPY underlying would beat XSP hands down and I was a bit confused why you would think to compare. OK when you are comparing SPY options with XSP, I would still prefer SPY options simply because of the higher liquidity of SPY options and the tight bid/ask spread but most importantly, the more choice of strategies available for you to combine SPY options with its underlying that results in better control of losses and higher probability of profit and higher profit potential. The biggest limitation I find for XSP is that it's just an option subject to time decay that you can only reduce somewhat via rolling it forward.