How to Trade SPX

If you’ve been trading for years, then you know weekly options for EFTs (exchange-traded funds) and single-name equities. But do you know how to use weekly options on SPX (S&P 500 Index) just like the top institutions?

Thanks to the Thursday and Tuesday expirations, you can get an SPX expiring every day. This has opened the door for unique trading flexibility, which means you must learn how to day trade SPX options.

What is SPX?

SPX is a trading vehicle that can track the performance of the top 500 American companies. Generally, SPX serves as a live indicator of the U.S. equities’ strength. SPX resembles SPY, but it’s based on the $S&P 500 index.

Unfortunately, you can’t trade these indices directly like you would EFTs. The SPX option resembles the SPY in many ways, but you can’t settle the previous with shares. Instead, you can only settle it in cash. On SPY can only be settled in shares upon expiry.

For more details on how to trade spx options td ameritrade, please read on.

How does SPX trading work?

Generally, earnings, Fed policy meetings, and Job reports can activate a huge move in S&P Index. For options expiring on a certain event day, it means high implied volatility, which means a high premium.

But with SPX options that expire daily, you can target exposure to single events and pick an expiration date to align with the market event or firm’s news. Since it’s a short-term contract, a small change can magnify the losses or gains in the weekly SPX options.

Therefore, you can use the SPX weekly put or call options to hedge against your portfolio or speculate a short-term move. So, you can use SPX trading strategies to protect your portfolio against specific market events.

When can I trade SPX options?

The SPX has lots of similarities and differences with the SPY. But the main is that the SPX is a European style while SPY is an American style. This means that you’ll trading spx options on expiration day.

The expiration time has to align perfectly with the market event or company news. On the other hand, you can exercise the SPY options at any time before its expiration date. SPX sellers don’t have to deal with early assignment risks.


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