How to Trade SPX Options (Without Getting Burned)
Let me guess, you’ve heard traders talk about SPX options like they’re some kind of secret weapon. And now you're wondering if you're missing out.
You're not.
But also, you might be...
Let’s break down how to trade SPX options like the pros.
What Even Are SPX Options?
SPX options are based on the S&P 500 index. Not a stock. Not an ETF. An index.
You can't "own" the S&P 500. But you can trade options on it. That’s where SPX comes in.
Here's the catch:
- They’re cash settled. No shares change hands, just money.
- They expire in dollars, not shares.
- And they’re European-style, meaning you can only exercise them at expiration.
No early exits. No assignments.
Just a final reckoning when the bell rings.
Why SPX? Why Not Just Trade SPY?
SPY is the ETF version of the S&P 500. It's super liquid and beginner-friendly.
But SPX has some tricks up its sleeve:
- No 1099 headaches. SPX options get 60/40 tax treatment, meaning 60% of your gains are taxed at long-term rates even if you held them for 20 minutes.
- Cash settlement. No surprise stock delivery if you hold through expiration.
- Higher notional exposure. One SPX contract = roughly 10 SPY contracts.
In plain English?
Big size, cleaner taxes, fewer logistics.
But it’s not all roses...
What’s the Catch?
Trading SPX options is like driving a Porsche. Smooth, powerful and very unforgiving if you don’t know what you’re doing.
Here’s what can trip you up:
- Bigger dollar swings. Since each point in SPX is worth $100, even a 10-point move can smack your P&L hard.
- Expiration quirks. SPX has multiple expiries per week including Monday, Wednesday, and Friday. (Yes, that’s a thing.)
- Settlement confusion. Some expire at market close. Some settle on the next morning’s open. If you’re not paying attention? Surprise losses.
P.S. I’ve seen pros screw this up.
How to Actually Trade SPX Options
Okay, down to the good stuff.
Here’s a smart way to approach it:
1. Pick a Direction (or Don’t)
You can go directional (bullish call, bearish put) or neutral (iron condor, butterfly). SPX is liquid enough to support all of it.
Just know: premiums can be expensive. The market expects movement.
2. Mind the Expiry
If you’re trading 0DTE (same-day expiry), you're in the fast lane. SPX 0DTE has exploded in popularity—but it's not for the faint of heart.
Otherwise, weekly and monthly expirations offer more time cushion.
Pro tip: Double-check if your contract settles that day or the next morning. That one detail can make or break your trade.
3. Use a Profit Calculator
No, seriously.
SPX options can get complicated fast. Between delta shifts, time decay, and wide price ranges, it’s not enough to just “eyeball it.”
Our SPX Options Profit Calculator helps you plug in:
- Strike price
- Expiry date
- Your price targets
And shows your exact profit or loss before you hit “Buy.”
(If you’ve ever been surprised by how little or how much you made, this tool is for you.)
When to Avoid SPX
This might be unpopular advice, but here goes:
If you’re just starting with options, skip SPX.
It’s unforgiving. Complex. And mistakes get expensive.
Start with SPY. Learn the ropes. Then graduate to SPX when you can read the tape without blinking.
Trust me. This saves you tuition in the form of blown up trades.
Final Thought
Learning how to trade SPX options isn’t about mastering some elite strategy. It’s about understanding the mechanics, playing defense, and using the right tools.
Once you get the hang of it, SPX can be an efficient, powerful part of your playbook.
But go in unprepared?
It’s a quick way to learn the difference between "high leverage" and "high risk."
Always respect the move.
