SPY SPDR S&P 500 ETF
SPY is the largest and most liquid ETF in the world, tracking the S&P 500 index. It is one of the most popular underlyings for options trading due to its tight spreads, high liquidity, and liquid options chain.
Key Facts
- • Launched in 1993 by State Street Global Advisors, the first US-listed ETF
- • Tracks the S&P 500 index of 500 large-cap US companies
- • Expense ratio of 0.0945%, significantly lower than most mutual funds
- • Average daily trading volume over 70 million shares, highest of any ETF
- • Underlying for the largest options market in the world, with daily options volume exceeding 2 million contracts
Related Trading Concepts
Call Option
A contract that gives you the right (but not the obligation) to buy 100 shares of an underlying asset at a fixed price (the strike price) by a specific date (the expiration date). You buy a call when you expect the underlying price to rise above the strike price plus the premium you paid.
Put Option
A contract that gives you the right (but not the obligation) to sell 100 shares of an underlying asset at a fixed price (the strike price) by a specific date (the expiration date). You buy a put when you expect the underlying price to drop below the strike price minus the premium you paid.
Strike Price
The fixed price at which the holder of an option can buy (for call options) or sell (for put options) the underlying asset. Options are available at multiple strike prices, typically spaced $1 to $5 apart for liquid underlyings.
Option Premium
The price you pay per share to buy an option contract. The total cost of the option is the premium per share multiplied by 100 (the standard contract size) and the number of contracts you buy. The premium is made up of intrinsic value (if the option is in the money) and time value (the extra amount traders pay for the chance the option will move further into the money before expiration).
Break-even
The underlying price at which an option trade results in zero profit at expiration. For call options, break-even is strike price + premium per share. For put options, break-even is strike price - premium per share. The underlying must move past the break-even point at expiration for the trade to be profitable.
Volatility
How much and how fast an asset price swings. High volatility means large price moves in short periods; low volatility means calm, small moves.
Learn More With Our Guides
Analyze With These Tools
Options Profit Calculator →
Model long call and long put positions on SPY options at expiration.
Why use this: SPY is the most popular underlying for options trading, with the highest liquidity of any ETF.
Position Size Calculator →
Calculate optimal position size for SPY options trades based on your risk tolerance.
Why use this: After modeling your options trade, size your position to limit risk to 1-2% of your account.
Risk/Reward Calculator →
Evaluate the risk/reward ratio of SPY options trades.
Verify your SPY options trade offers favorable returns relative to the risk before entry.