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Understanding the differences may give an insight as to why we trade what we trade.
SPY has more volume but SPX has the value.
SPY is the SPDR S&P 500 exchange-traded fund (ETF), the most widely traded stock on the equity option exchanges. In normal times, over 100 million share a day are traded, less in the summer.
While the numbers of SPY options are much higher, the notional size of the SPX volume eclipses that of SPY. In fact, there is clearly much more money tied up in the index fund options.
SPY, as an ETF, is based on a single underlying, the SPY fund, but index funds are not. SPX is the index, which is the 500 stocks that compose the fund. Therefore, you cannot trade the underlying SPX to hedge options.
For this reason, the index fund is cash settled, vs. settled in the underlying shares with the ETF. If you end up 'in the money' SPX calls at expiration, you end up with cash, vs the stock with SPY.
With the shear size of the SPX, their options are about 10 times the size of SPY's. For practical terms, if you trade heavy, you might want to consider SPX.
Also, although I am not a tax expert, you may want to consult your CPA concerning tax benefits to trading index options vs ETF's.
Our programs are geared to retail traders mostly trading less than $100k, making SPY the preferred stock. SPX and SPY do behave similarly, so our programs should work for SPX as well.
~ Hugh
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New E-books Hot Off the Press
If you purchased any of our e-books in the last month or so, either individually or as part of a package, please contact us to receive your updated version.
~ Dale
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Live Training Dates
We are pleased to announce the next 'Wild Weekend of Webinars'.
Learn to trade live with Hugh, September 18, 19 & 20.
Each webinar is 2 hours in length, is recorded and available for your use for up to 3 months. Play, fast forward, pause and rewind as you wish, but do master the art and science of day trading SPY options to earn 5-10% per day in this unique system.
~ Dale
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