You Have Choices:
Medium Or Hard Tires
When index options were first traded, they were mostly for institutional traders. Contract sizes were large and out of reach for retail traders. But as the interest in index options grew, Cboe® created contracts with smaller values and different notional sizes and expirations to better align with the objectives and account sizes of retail traders. You can choose AM- or PM-settled contracts; standard, weekly, or month-end expirations; and mini contracts
Make flexible options
Work for you
SPX Product Suite Comparison
| Cboe Index Options | ETF Options | |||
|---|---|---|---|---|
| NanosSM | Mini-SPX (XSP®) | SPX ® | Versus | SPDR ETF (SPY) |
| 1/100th of XSP | 1/10th of SPX | 1 | Contract Size | 1/10th of SPX |
| $1 | $100 | $100 | Contract Multiplier | $100 |
| $450 | $45,000 | $450,000 | Approx. Notional Size (if S&P 500 is $4,500) |
$45,000 |
| Trading account credited or debited in cash | Settlement Type | Delivery of underlying shares | ||
European style, exercised at expiration, no risk of early exercise or assignment |
Exercise Style | American style, can be exercised or assigned prior to expiration | ||
| Capital gains may benefit from 60% / 40% tax treatment* | Tax Treatment | Standard short- and long-term tax rules | ||
| Standard market trading hours | Global trading hours available** | Extended Trading Hours | Standard market trading hours | |
| Settlement and exercise style eliminate potential economic and tax risk for writers | Certainty of Settlement | After market contract assignment may result in unplanned residual positions | ||
Decision time
How to decide which option to trade? It comes down to your directional bias and how much risk you're comfortable taking on.
If you think the S&P 500® is overvalued and ripe for a fall, but you don't think it will happen in the next few days, you may want consider trading index options that expire further out in the future. If volatility is relatively low and the market is calm, you may want to consider trading slightly out-of-the-money weekly options that expire within a few days. For example, if you buy a call and the index moves higher before expiration, you could make a small profit. If the index moves lower, your loss would be the premium you paid.
Benefits Of Index Options:
Lapping The Competition
Your first thought might be "But can't you do that with stock or exchange-traded fund (ETF) options?" You can, but index options come with unique benefits worth exploring that you won't find with stock or ETF options.
Cash Settlement
Take pole position with cash settled index options - account credited or debited in cash
No Early Exercise Risk
The guardrail of European style: index options exercise only at expiration, no early assignment or exercise
Potential Better Tax Treatment
Know the split: profits are taxed as 60% long-term and 40% short-term
Why Trade Index Options?
Crossing the Finish Line:
The Checkered Flag
Download our free guide to learn more about the potential benefits of index options and why you may want to consider them as part of your trading strategy.
Cboe Index Options Quick Links
Tradable Products:
Options Learning:
*Under section 1256 of the IRS tax code, profit and loss on transactions in certain exchange-traded options, including SPX options, are entitled to be taxed at a rate equal to 60% long-term and 40% short-term capital gain or loss, provided that the investor involved and the strategy employed satisfy the criteria of the tax code. Investors should consult with their tax advisors to determine how the profit and loss on any particular option strategy will be taxed. Tax laws and regulations change from time to time and may be subject to varying interpretations.
**Global Trading Hours (GTH). The trading hours for options on the SPX, SPXW (SPX Weeklys and SPX End-of-Month), and XSP (Mini-SPX) begin at 8:15 p.m. Eastern time and end at 9:25 a.m. Eastern time. Please visit the Hours & Holidays page for more details. Options involve risks and are not suitable for all investors. Before trading options, you should discuss with your broker whether trading options is right for you and review the Characteristics and Risks of Standardized Options (or Options Disclosure Document) regarding risks associated with trading options. There are important risks associated with transacting in any of the Cboe Company products or any of the digital assets discussed here. Before engaging in any transactions in those products or digital assets, it is important for market participants to carefully review the disclosures and disclaimers detailed at https://www.cboe.com/us_disclaimers/. These products and digital assets are complex and are suitable only for sophisticated market participants. These products involve the risk of loss, which can be substantial and, depending on the type of product, can exceed the amount of money deposited in establishing the position. Market participants should put at risk only funds that they can afford to lose without affecting their lifestyle.