SPY and SPX—What’s the Diff and Does the Difference Matter?

two puppies | the difference between SPX and SPY | Sheaff Brock

SPY and SPX—What’s the Diff and Does the Difference Matter?

In a rather cryptic and historical intro to the subject of options, Yahoo Finance states: “When it comes to the battle of SPY versus SPX, the first may have more volume, but the second has more value.”

Size comparison:

The SPDR S&P 500 (NYSE symbol SPY) is, in fact, the most widely traded contract on option exchanges. The SPX S&P 500 index options have far lower trading volume, but each contract is ten times the size of a SPY.

Underlying security:

Underlying the SPY contract is the Exchange Traded Fund, and the price fluctuates based on buyers and sellers of the ETF. Underlying the SPX are the actual 500 stocks composing the S&P 500 Index;, the SPX value is determined directly by the value of those 500 stocks.


As index options, SPX options are settled in cash, while SPY is settled in stock.

“A market index is simply a measure designed to allow investors to track the overall performance of a given combination of investment instruments,” explains InvestopediaFact is, the authors remark, for most of the 20thcentury the average investor had no avenue available to actually trade indexes, and “the listing of options on various market indexes allowed many traders for the first time to trade a broad segment of the financial market with one transaction.”

Then came the development of ETFs, or exchange-traded funds. An ETF is essentially a mutual fund that trades like an individual stock.“On one hand, we can state that investors have never had more opportunities available to them. At the same time, the average investor can easily be confused and overwhelmed by all of the possibilities that swirl around him or her,” the Investopedia article concludes.

At Sheaff Brock, where wealth managers rely more heavily on fundamental stock analysis as compared with technical analysis, incorporating SPYs allows a broad spectrum of investors the opportunity to take advantage of both the broad diversification of the S&P 500 and the difference that typically exists between the implied volatility and the actual volatility in the marketplace.

And, for those or those investors comfortable with taking additional stock market risk, the Index Income Overlay portfolio is a long-term, bullish play on stock investing using the SPDR S&P 500 ETF. This strategy makes use of put selling, with the options trading serving as an “overlay” on an existing portfolio which serves as collateral for the options account.

For Sheaff Brock investors, the SPDR S&P 500, or SPY can really be “the doorway to trading a broad segment of the financial market with one transaction.”

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