Stock Market Options Trading 162: SPY Options Trading Discussion
Sep 9, 2025
Explore the intricacies of SPY options trading, including a comparison of SPY and SPX regarding contract size and tax implications. Discover Brian's Delta Neutral double diagonal strategy and learn how to manage positions effectively. The conversation dives into when to prefer SPX for cash settlements and the best market conditions for strategies. Eric shares his technique for utilizing covered calls on SPY to generate income. Tune in for valuable insights on rolling strikes and volatility impacts!
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Key SPX vs SPY Structural Differences
- SPX and SPY differ mainly by contract size, settlement style, and tax treatment.
- SPX is cash-settled European style and offers 1256 tax treatment while SPY is physically settled American style.
Test New Strategies On SPY First
- Use SPY to test strategies in smaller size before moving to SPX.
- Start with a few SPY contracts to learn mechanics and reduce risk before scaling up to SPX.
SPY Assignment Risk Is Real At Expiration
- Physical settlement creates assignment risk for SPY trades that expire in-the-money.
- Even one penny ITM can lead to assignment of 100 shares per contract at expiration.