Kardec Trader explains why SPY options beat SPX for trading. SPX has wider spreads and thinner liquidity, which kills you on the exit. SPY spreads run 2-3 cents with better depth, so you can actually get out of losing trades without getting slammed.
Kardec Trader.
May 5, 2023.
2 cents to 3 cents.
Hoping to lose $1,000 but if spreads widen you may instead lose $2,000 to $2,500.
I don't like trading SPX by the way. I just think the spreads are too wide and I know option traders can attest to this. When you trade certain options with wide spreads, the moment the trade goes against you, the spreads become so much wider that you lost unimaginable. Let's say you're hoping to lose a thousand. The trade goes against you super, super quick. So when the bid drops really, really low, what happens next? If you get out instead of losing 1000, you're probably losing 2000 or 2500. So I've noticed that with options that have wide spreads, I'm not really a fan of them. That's why I feel more comfortable trading spy. When trade takes buy options, a lot of liquidity. The spreads are tight. You have like 2 cents, 3 cents. So if the trade goes against you because liquidity is not a problem and spreads are not that wide, you can get out at a decent loss.
