If you trade the stock market or do stock option trading, then you are familiar with the S&P 500 and it’s ETF SPY. According to Money
” SPY, launched in 1993, was the first U.S.-listed ETF. It owns shares of 506 companies. The fund is structured as a unit investment trust. This differs from the structure of other similar ETFs and may result in slightly higher costs due to a few fundamental differences, such as the inability to immediately reinvest dividends paid by the underlying stocks or to purchase futures on the index. The fund is typically among the largest ETFs in terms of assets and daily trading volume.”
When you trade the SPY you get exposed to the top stocks like, Facebook, Microsoft, Google, Netflix and more, Instead of investing each of these individual stocks and dealing with the ups and downs of each one. If one stock goes down you will not have to suffer as much with the SPY, because other big stocks might increase in value at the same time, resulting in an profit for you stock option.
What I like about the SPY
- Liquidity…The SPY has the highest volume of buyers and sellers than ANY other ETF. At any given time there are over 100k buyers and sellers trading calls and/or puts, This reality gives you lots of buy and sell opportunities.
- Shorter Expiration dates This is related to it’s liquidity…The SPY has numerous time frames for expiration. Some ETF have only 25 to 30 day expiration dates for options, this does not allow for quick easy trades that can generate high profit potential
- Don’t have to worry about extremely large down turns or upturns (if you are selling) from earnings or really bad news (or good news for that matter). Like I stated earlier, the SPY is a composite ETF of all the stocks on the S&P 500, about 20% of all the stocks are technology, so if you are invested in smaller stock like Coca Cola and that particular stock has bad news or earnings, your overall investment will not be affected as much
The one con….
The one thing I HATE about the SPY is that…it’s sometime hard to predict the daily and sometimes weekly trend and it goes back to the SPY being a composite of all stocks. With a stock like Google, you can see were a stock is going with good or bad news(after the fact), then follow that trend or do a reversal trade, but with the SPY….Yikes!!. The SPY does not have a Earnings report every quarter or anything like this, but AT TIMES the market tends to be choppy, but not EXTREME like individual stocks…I have seen Stocks like GOOGLE, AMAZON. etc take $50-$100 downturns..OUCH, but the SPY rarely takes a dives that low, but still it can be nerve racking!
Well that’s all I have to say right now…Be sure to check out my youtube channel or blog. Thanks.