SPX vs SPY 0DTE Options Explained

When trading 0DTE options on the broader market, traders generally choose between two primary instruments: the SPX (the S&P 500 Index itself) and the SPY (the SPDR S&P 500 ETF).

While their price action is nearly identical, the mechanics of how the options settle and are taxed are vastly different.

1. Settlement Mechanics

The most critical difference for 0DTE traders is settlement risk.

SPY Options are Physically Settled: If you hold an in-the-money SPY option through expiration at 4:00 PM EST, you will be assigned the underlying shares. This means if you own a 0DTE SPY Call, you will wake up Monday morning owning 100 shares of SPY per contract (requiring roughly $50,000 in capital). If you don’t have the capital, your broker will force-liquidate your position or hit you with margin calls.

SPX Options are Cash Settled: If you hold an in-the-money SPX option through expiration, your broker simply credits or debits your account the cash difference. No shares are ever exchanged. This eliminates assignment risk, a massive advantage for 0DTE traders who may not want to manually close their winning positions in the final seconds of the day.

2. Size and Notional Value

The SPX index trades at roughly 10 times the value of the SPY ETF.

• If SPY is at $500, SPX is roughly at 5,000.
• Therefore, one SPX option contract controls 10 times the notional value of one SPY contract.

This means you only need to trade 1 SPX contract to get the same exposure as 10 SPY contracts, saving you 90% on broker commission fees.

3. Tax Advantages (Section 1256)

In the United States, SPX options qualify as Section 1256 contracts. This means any gains or losses are taxed at a blended rate of 60% long-term capital gains and 40% short-term capital gains, regardless of how long you held the trade.

Since 0DTE trades are held for less than a day, SPY trades are taxed at 100% short-term capital gains. Trading SPX provides a significant tax advantage for profitable traders.