SPX vs. SPY vs. QQQ: Choosing the Best Underlying for 0-DTE Trading

A practical guide for intraday options traders

1. Why 0-DTE?

Zero-days-to-expiration (“0-DTE”) options have exploded since daily expirations became available on SPX, SPY and QQQ. They routinely account for 40-50 % of all S&P-500 option volume and in some retail datasets SPY alone captures ≈ 88 % of 0-DTE trades. The attraction is obvious: fast-decaying premium, precise intraday risk-take, and no overnight gap risk.

But which underlying should you use? The answer hinges on six practical variables:

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2. Liquidity & Slippage

• SPY reigns for small tickets. One-strike SPY 0-DTE spreads are often $0.01-0.02 wide near-the-money, letting scalpers flip contracts for a few cents profit.
• SPX rules for size. Institutional desks prefer SPX because one contract controls ten times the notional of SPY, yet bid-ask spreads are frequently $0.05-0.10, giving better basis-point efficiency despite the bigger dollar spread.
• QQQ is a Nasdaq bet. Liquidity is healthy but order-book depth drops sooner, so wide‐wing iron condors or far-OTM hedges cost more than their S&P counterparts.

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3. Contract Size & Capital Efficiency

For identical delta, SPX buyers post 10 × the premium, but cash-settlement eliminates the margin shock of being assigned 100 000+ shares into the close.

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4. Settlement Mechanics

• SPX: Cash credit/debit based on the official index print (PM-settled for SPXW); impossible to end up long or short stock. Ideal for strategies that purposely hold through expiration (e.g., lottery puts).
• SPY/QQQ: If you forget to close ITM options, you wake up long/short 100 ETF shares. That ties up overnight margin or incurs auto-liquidation fees.

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5. Taxes & Statements

U.S. traders holding SPX (or mini-SPX/XSP) benefit from automatic mark-to-market and the blended 60/40 rate, often shaving 5-10 percentage-points off effective tax versus SPY/QQQ short-term gains. Reporting is simpler (single line on Form 6781). ETFs follow normal Schedule D rules, wash-sale included.

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6. Pattern-Day-Trader (PDT) & Margin

Because FINRA classifies all equity and index options as securities, four same-day round trips in five days will flag you as a PDT and require $25 k minimum equity, regardless of ticker. Futures options (e.g., ES 0-DTE) are exempt, but that is outside the scope of this comparison.

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7. Advantages of SPX Over SPY for Retail Traders

While SPY is often the default choice for retail traders due to its smaller size and accessibility, SPX offers several advantages:

• Cash Settlement (No Assignment Risk): No risk of accidentally taking on or delivering ETF shares; ideal for 0DTE trades held to expiration.
• Favorable Tax Treatment: SPX falls under §1256 tax rules — 60% long-term/40% short-term gains — often resulting in a lower effective tax rate.
• Fewer Contracts, Same Exposure: Each SPX contract ≈ 10 SPY contracts, so you can achieve the same exposure with fewer day trades.
• Cleaner Execution at Size: Preferred by institutions; more efficient for trading larger notional exposure.
• Simpler P/L and Tax Reporting: Mark-to-market treatment and single-line reporting make end-of-year accounting easier.
• Expiration Flexibility: Access to both AM- and PM-settled expirations adds timing flexibility for event-driven strategies.

These benefits can make SPX a superior product for retail traders with accounts over ~$10–15k who want capital efficiency, tax optimization, and operational simplicity.

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8. Can You Backtest SPY Strategies Using SPX Data?

Yes, traders can use SPX data as a proxy for SPY to backtest strategies, especially when:

• You’re modeling market-directional moves or volatility-based strategies
• You need index-level historical data and don’t require ETF-specific pricing

But important caveats apply:

Bottom Line: SPX is a viable proxy for high-level SPY strategy backtesting, but product-level differences must be factored in before real-world deployment.

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9. Which Ticker Fits Your Style?

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10. Practical Checklist Before Clicking “Send”

1. Size matters. Know the notional you are controlling; SPX moves $1 =$100 per contract.
2. Check the settlement window. AM-settled SPX end-of-week contracts use the opening print, not the 4 p.m. close.
3. Mind your day-trade count. Cash accounts in SPY/QQQ avoid PDT but cannot use leverage; margin accounts must respect the $25 k rule.
4. Model after-tax P/L, not just gross. The 60/40 split can swing net results if you trade size frequently.
5. Have an exit plan. In fast markets bid-ask spreads can widen suddenly, especially in QQQ; use limit orders or pre-set stop logic.

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Bottom Line

• Choose SPX if you need large notional exposure, cash settlement, and tax efficiency – and your account comfortably absorbs four-figure premiums and margin swings.
• Choose SPY if you prize razor-thin spreads, want to scale in/out with $50 k clips, or run algorithmic scalps that rely on deep liquidity.
• Choose QQQ when your thesis is specifically Nasdaq-driven or you seek a slightly smaller contract than SPY with similar mechanics.

There is no universally “best” 0-DTE underlying – the optimal choice aligns with your account size, risk tolerance, and operational constraints. Evaluate these trade-offs consciously, and you’ll sidestep most of the forum confusion around “SPY vs. SPX?”. Trade safely!

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This article is for educational purposes only and is not tax, legal, or investment advice. Consult a qualified professional before implementing any strategy.