It says SPX is better on tax point of view ? Why so ? It is worth considering to trade SPX and not SPY depending on how big your portfolio is ? What is its just 1 to 2 DTE on a $50k account is the tax savings on SPX considerable ? Asking because my current broker only has SPY
Credit spread SPX vs SPY?
byu/East_Indication_7816 inoptions
Posted by East_Indication_7816
4 Comments
SPX will be treated as 1256 contracts so no matter how long your hold period is, it’ll be 60% LT and 40% ST capital gain. That tax treatment could make a big difference in taxation depending on your other incomes. Also, SPX is cash settled so there’s no worry about exercising or assignment, definitely no pin risk where the short is ITM and assigned but long already expired so they can be held to expiry if you want to. Generally speaking I prefer SPX over SPY once the account is big enough. SPX is quite liquid as well.
If you’re doing short term trades, SPY will always be considered short term gains or losses by the IRS. Since SPX (and XSP) are options on futures contracts, the IRS treats all gains as 60% LT and 40% ST, regardless of the actual holding period. How much this actually matters depends on how much you gain or lose over the course of the year and what your tax bracket is for ordinary income.
SPY is an ETF while SPX is an index fund. Pretty sure all SPY options count as short term capital gains where SPX can count as a 60/40 split of long/short term gains. Also, SPX settles in cash while SPY does not
This really only applies if you live in the USA