Option Trading In SPY: 15 Things You Should Know

Last Updated on October 25, 2022

We have received some questions about how to trade SPY options (SPY is the ticker code for the ETF that tracks S&P 500). To save ourselves time and help the readers, we have gathered a short summary of the most frequently asked questions about option trading in SPY. We have previously covered options trading in QQQ.

Below you find 15 things you should know about option trading in SPY:

Are there options on SPY?

Yes, SPY has a huge options market and trades thousands of contracts a day. It’s a liquid market with a wide variety of expiration dates in the future. SPY is one of the most heavily traded ETFs and is the oldest ETF still trading.

How to day trade SPY options

Unfortunately, we don’t have any quick and easy guide to day trade options profitably. Day trading is hard, and we believe it’s even harder to make money in the options market. Remember, the derivative market is a zero-sum game. We believe day trading SPY options is a bad idea for 99.9% of all traders.

How do you master SPY options?

First of all, you need to have knowledge about options. Far too many traders enter the options market with a naive dream of striking it rich. You need both theoretical and practical knowledge. In option trading, you can lose money even if you are right about the market direction (due to the many factors influencing the price of an option).

The most important thing is to have a trading plan. What are you going to trade? Why are you going to trade? What is your strategy?

Part of the trading plan involves making sure you have a statistical trading edge. This is the most important element in trading!

The only way to find out if you have a statistical edge is to backtest (what is backtesting?) If you are new to trading and backtesting, you might be interested in our inexpensive backtesting course:

Can you trade SPY options 24 hours?

You can trade SPY (SPX) for more or less 24 hours. CBOE Options Exchange offers 24-hour trading, but only for five days a week. SPY options, on the contrary, only trades from 8:15 to 04:15 ET.

Can you become a millionaire trading options?

Yes, but it’s very unlikely. Most traders lose money because this is a zero-sum game. What you gain someone else must lose. Options are complicated and influenced by many factors.

Why are SPY options so popular?

In trading, liquidity is king. When an asset is liquid, you can get a fair price even during turmoil and panics. Commissions are low, but options might involve slippage:

How do I buy options for the S&P 500?

You must open a trading account at a broker to trade options for the S&P 500. We use Interactive Brokers ourselves. You can find more info in the following article on what to look for when you are opening a trading account:

Are option traders successful?

Most options traders are not successful. The options market is a zero-sum game: what you gain someone else must lose.

How are SPY options taxed?

Options are taxed based on the rules of your residence country because capital gains are in most cases sourced to your domicile. If you are a German tax resident trading US options, you are liable to German taxes on any capital gains.

The best strategies can be found in our….

Strategy Shop

Backtested trading strategies

However, taxes are complicated and US citizens are liable to US taxes wherever they reside. Moreover, tax treaties might also dictate where you should pay taxes. We recommend using a tax advisor if you are uncertain.

What time do SPY options start trading?

Most of the trading is done during regular trading hours: 0930-1600 Eastern time.

When did SPY options start trading?

SPY is the oldest ETF still around. It started trading back in 1993 and options contracts followed suit.

What time do SPY options expire?

Each option contract has an expiry date. Because SPY options are standardized, they follow the “regular” expiry dates for most options: The options expiration happens on the Friday before the 3rd Saturday each month in the US (each month).

Can you swing trade SPY options?

Of course you can! But again, to repeat ourselves, SPY options trading is extremely difficult to make money on. You can even lose money when you are right about the market direction because a big part of the option price is implied volatility and time. We recommend taking a course or reading books to make sure you sully understand how options are priced.

Can you scalp SPY options?

Scalping is difficult, and options trading is also difficult. This is a bad mix. Read here for our take on scalping:

What are the SPY options trading hours

You can trade SPY from 09:15 AM to 04:15 PM Eastern time.

Relevant options articles:

We have not covered options yet on this site, but you’ll get a good understanding by reading these two articles:

Final thoughts on options trading in SPY

The most important thing in trading is to have a statistical edge. Because you often trade against market makers in the options market, we believe most traders are better off trading stocks or futures. However, if you still want to trade SPY options, we recommend you spend time understanding the theory behind option pricing.

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