SPY vs SPX Options

When it comes to trading, we often hear SPY vs SPX. Is there a difference between the two? They’re both Indices that trade on all major exchanges. But they follow two very different things. One is ETFs, and the other is theoretical.

Countless trading strategies can be applied to thousands of different stocks. Day trading, swing trading, options, the list goes on and on. But one asset is considered the purest way to trade: the S&P 500 index.

While everyone who follows the stock market knows the S&P 500, not everybody knows how to trade it. Not everybody even knows how to name it. It is not unusual to see social media users confuse the ticker symbols $SPX and $SPY. 

What is the difference between the two? Both symbols are tradable on the US stock market. Both track the benchmark S&P 500 index, and both are among the most popular symbols in the world to trade.

But if you were to compare SPX and SPY directly, you would realize they are two very different assets. This article will discuss exactly what SPY vs SPX are and why they are so often confused with one another. 

Let’s start with the basics of SPY vs SPX: What is the S&P 500 index? We already said that SPX and SPY track the S&P 500, which will help us understand this.

The S&P 500 is the benchmark index for equities in the United States. It is also the measuring stick for stock indexes around the world. 

The S&P 500 is an index of 500 of the largest American publicly traded companies. It had earlier iterations, including a 233-stock weekly index in 1923 and a 90-stock daily calculated index in 1926.

The index as we know it now was expanded to 500 stocks on March 4, 1957, and was managed by the statistics company known as Standard & Poors. 

It quickly became the benchmark for indexes and the definition for calculating the performance of the markets themselves. Have you ever heard anyone say the market returns about 9-10% annually? Well, that calculation comes from the average annual returns of the S&P 500 since its inception in 1957. 

SPY vs SPX Example

Is the S&P 500 an Index Fund?

The S&P 500 itself is not an index fund, but there are index funds that track the S&P 500. Vanguard introduced The first such fund as a mutual fund in August 1976. Since then, hundreds of other assets have tracked the S&P 500 in some way. 

Exchange Traded Funds or ETFs are another popular way to invest in the S&P 500. These funds are traded on stock exchanges but represent other assets. Some of the most popular ETFs in the world are low-cost index funds that hold all 500 companies from the index. 

Low-cost index funds are a great way to passively invest in the stock market. Even Warren Buffett has said that for most Americans, investing in these low-cost index funds is the best way to grow your wealth over time. So, what does this have to do with SPX vs SPY? The index fund discussion leads us to the world’s most well-known ticker symbol: SPY. 

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What Is the SPY?

Spend time on social media and see $SPY show up constantly. Traders are always trying to analyze it on charts using technical analysis. So, what is SPY referring to?

The ticker symbol SPY is for the SPDR S&P 500 Trust ETF (NYSEARCA: SPY). It’s the oldest and largest ETF in the world, with over $412 billion in assets under management. SPY was launched in January 1993 and has provided an average annual return of 9.73% since its inception.

SPY is designed to track the S&P 500 and holds similarly weighted allocations to the benchmark index. Funds will never mirror the exact performance of the index, but holding exposure to all of those stocks in one asset is extremely valuable. It’s the simplest way to invest in the largest companies on the US stock market

As you can imagine, SPY holds the largest stocks by market capitalization. Here’s a look at the top ten holdings in SPY:

Stock NameStock SymbolWeighted Allocation in SPY
Apple Inc NASDAQ: AAPL7.44%
Microsoft CorpNASDAQ: MSFT6.79%
Amazon.com IncNASDAQ: AMZN3.08%
Alphabet Inc Class ANASDAQ: GOOGL2.01%
Tesla Inc NASDAQ: TSLA1.90%
Alphabet Inc Class CNASDAQ: GOOG1.76%
Berkshire Hathaway Class BNYSE: BRK.B1.65%
Meta Platforms Inc Class ANASDAQ: META1.65%
UnitedHealth Group IncNYSE: UNH1.25%

Here’s the sector breakdown for SPY:

Sector NameWeighted Allocation in SPY
Information Technology27.91%
Health Care13.52%
Consumer Discretionary10.59%
Communications Services8.58%
Consumer Staples  6.68%
Real Estate2.39%

SPY is a fully tradable asset; each share costs about $437.18 as of this writing. You can trade options and futures against SPY and short-selling the ETF if you’re bearish against the market

What Is the SPX?

If SPY is an ETF that tracks the S&P 500, what’s SPX? SPX is the numerical measure of the S&P 500 itself, calculated in basis points. When we say the S&P 500 gained 1.0% or lost 1.0% in a day, it’s measured as a total gain or loss of basis points from the index’s value. This is why you see SPX referred to as levels like 4200 or 4500. 

This doesn’t mean that one share of SPX costs $4,200. You cannot buy shares of SPX. It’s not an asset that can be owned in a portfolio. SPX is used as a pure investment play against the current health of the stock market. The most common ways to trade  SPY vs SPX are futures and options. 

Trading the SPX

When you trade options against the SPX, it’s a cash-settled option paid out in cash at the contract’s settlement. They’re also European-style options, meaning you cannot exercise or close them early. If you want to trade SPX, you need to have conviction in the final value of your trade.

SPX is often seen as the purest way to trade the S&P 500. Before you ever trade SPX, ensure you have a good idea of what you’re doing. These options trades can go against you in a hurry if there’s a sudden market sentiment change. 

You can also trade 0DTE or 0 Days to Expiry options on SPX. This means these contracts will expire at the end of the current trading session. 0DTE options have become a popular way to gamble on a stock or index with immediate results. If you know what you’re doing as an options trader, the volatility of 0DTE options can be great. But if you’re unsure, these can be an easy way to blow up your portfolio. 

Final Thoughts: SPY vs SPX

Even though SPY and SPX both track the S&P 500 index, they operate differently. SPY is an ETF that you can buy and hold for the long term. Historically, this fund has provided a return of about 9.7% annually and pays a modest quarterly dividend yield of about 1.55%. ETFs like SPY are designed to give investors passive exposure to the 500 largest publicly traded companies in the United States. 

SPX, on the other hand, is a trader’s asset as it cannot be held in any long-term portfolio. The only way to trade SPX is through futures or options, so we recommend having some experience in options trading before trying to tackle SPX. Many traders exclusively trade SPX daily. 

There is no right answer to this question. SPY and SPX serve different purposes for different investment and trading strategies. If you are a new investor with long-term aspirations, SPY belongs in your portfolio. But if you are an experienced trader with a finger on the market’s pulse, you will likely have more interest in trading SPX. 

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