Trading the CBOE’s SPX AM and PM settled Options

If you need options on the S&P 500 the CBOE’s SPX series is one of the most popular solutions in the marketplace.  The CBOE continues to enhance this product with additional expirations—the latest being the addition of options expiring on Tuesday and Thursday afternoons in the spring of 2022.  These products were immediately successful.  With all the days of the week covered it will interesting to see where the Cboe goes next, I suppose more days with AM expiration might be possible, but I think it would be more likely for them to add mid-day expirations next.

In May 2017 the CBOE did some welcome cleanup on the SPX options.  Previously the weekly SPX options that expired on the same Friday as the monthly SPX option series carried the SPXPM ticker.  The SPX and SPXPM options differed in that the SPX options expire at open on those Fridays and the SPXPM expired after market close.   Other than expiring on the same day as the SPX options the SPXPM options were no different than the SPXW options expiring on other Fridays.  Not surprisingly this difference created problems.  Since the SPXPM options didn’t show up in most SPX option chains most people didn’t even know that they existed. In addition, most brokers’ software did not recognize that the SPXPMs were effectively SPXWs so if you tried to use them in a calendar spread with other SPX/SPXW options you were out of luck.  The CBOE has rationalized this situation by renaming the SPXPM as SPXW options which in hindsight was the right symbology all along.

If you haven’t reviewed the CBOE’s SPX and SPXW options you should—they can save money, enhance your profits, and eliminate some risks.

First, about the money, SPX/SPXWs are:

  • 10X the size of SPY options,  reducing commission costs if you are trading positions of that size.  Their price is roughly 10X the equivalent SPY option. If the SPX options are too large for you the CBOE also offers XSP contracts which are approximately the same notional size as SPX options.  XSP options have the same characteristics as SPX options but in the past tended to have wider spreads and not as much liquidity. My sense is that these are increasing in popularity.
  • Considered taxable as section 1256 contracts—generally 60% of your gains are treated as long-term, regardless of how long you hold them
  • Cash-settled so there is no need to close out a trade just to eliminate the risk of an option being exercised, or expiring in the money and triggering a buy or sell of the security.

SPX/SPXWs reduce aggravation because:

  • They eliminate pin risk, and any other scenarios where you end up long or short securities when your options expire in the money
  • They can only be exercised at expiration (European style), so there is no risk of early assignment unbalancing a spread position.   You don’t have to worry about ex-dividend dates triggering assignments.
  • For SPXW options there are no delays in settlement—the opening settlement price of SPX (ticker SET) can sometimes be delayed an hour or more because order imbalances delay trading on some stocks. The market close is usually more orderly.
  • SPXW options are easier to trade into expiration because you don’t have the overnight risk associated with the AM expiring SPX options.  You don’t have to worry about the market gapping up or down before market open—instead, you have the relatively more predictable market close dynamics to work with.

I’ve traded SPX/SPXW options for a while now, and there’ve been a few surprises, some good, some bad.

  •  There are eight flavors of SPX options:
    • The standard AM settled options that expire on the morning of the third Friday of the month (SPX).  These are floor traded and tend to have relatively wide bid/ask spreads.  Their expiration value is published under the ticker SET  (^SET for Yahoo Finance).
    • Seven PM settled flavors: each day of the week, the End of Month, and the Quarterlys.   All of these show up under the SPX option chains, but their ticker is SPXW. The Quarterlies will trump the Weeklys and the End of Month if they all fall in the same week.  The PM expiring options use the standard S&P 500 Friday close SPX (^GSPC for Yahoo Finance) as their expiration value.
  • If you want Friday PM settlement on the traditional monthly expiration week you must use the SPXW symbol not the SPX symbol—user beware.
  • The minimum increment on prices even with spreads is $0.05
  • Close to the money strikes are offered at 5-point intervals (e.g., 3730 / 3735), the equivalent on SPY options would be 373 / 373.5.   These 5-point intervals enable tight credit/debit spreads and better resolution in placing positions.
  • The bid / ask spreads on AM-settled SPX options tend to be wide, the PM-settled options are somewhat better. For SPX options, a  limit order halfway between the bid and ask will usually fill.  Never use a market order—you are leaving money on the table.  This is one area where SPY options are superior.
  • Non-expiring SPX/SPXW options trade 15 minutes after the regular market close.  Expiring options stop trading at 4 PM ET.
  • Even when AM expiring SPX options have expired, some brokers’ software (e.g. Schwab and Fidelity) will not consider them closed until the following Monday.  This is problematic if you have a calendar option position in place with the expired options as the short leg.  A workaround for this in order to effectively close out your long position is to roll it up to a much higher strike.  This requires some margin, but at least you can effectively cover your position.
  • You can create “covered call” type positions in some cases using the S&P 500 ETFs SPY and IVV.  For more on this see Covered Margin Treatment for Short, Cash-Settled Index Options.

Trading SPX options in IRA accounts can have some wrinkles.  Some brokers might not allow cash-settled index options such as SPX spreads in IRA accounts.  Fidelity, Schwab, and TDI support vertical spreads on index options.

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12 thoughts on “Trading the CBOE’s SPX AM and PM settled Options”

  1. “For SPX options, a limit order halfway between the bid and ask will usually fill. Never use a market order—you are leaving money on the table.” Is this something you have tried or is it an assumption that a market order will fill at a worse price? My understanding is SPXW options on CBOE are electronically traded so the question is does their matching engine have logic for market orders to not fill at the best price? I usually float at 0.05 below the midpoint to get a quick fill. I have not tried it yet myself but I am curious.

    • Hi Bob,
      The only place I use market orders with options is on SPY, where the spread is usually a cent or two wide. Usually they will fill at the bid price, but occasionally, at least with Fidelity I will get an improvement over the price I entered. My theory is that Fidelity has essentially a dark pool for options in place that they run the order by before they submit it to the exchanges. I’ve never tried a market order with SPX options but I’d be pretty surprised if it didn’t fill at the bid or ask. In a fast market the bid you see on screen might not be the one in place when your order hits the exchange, so your fill might be higher, but I think this would be rare. I doubt the exchanges have any logic for price improvement over the current bid/ask. I agree with you that pricing 0.05 away from midpoint is a good strategy to get a fast fill.


  2. Hi I had a question regarding SPX options. I have traded regular equities, but these index I am new to and there are a few things I dont quite understand. I am aware of the AM options and how they are calculated and stop trading the day prior.

    For the Mon/Weds/Fri weekly options that are PM settled, these will trade right up to 4pm on expiration day then they stop ? unless it is not expiring that day then they keep going till 4:15p ? For the closing price, it is what the print reads exactly at 4:00PM EST then that is it ? I have had some short options get really close to being in the money and the flip flop between being in and out until the last few minutes.

    The reason why I am confused on this is b/c I am familiar with SPY under the same circumstances. For example, I am short an option, it is out of the money at 4:00pm, then it keeps trading after hours and now moves in the money after 4PM, now I am assigned if it moves ITM in the after hours. It seems like SPX this does not happen, it is either ITM or OTM at 4pm end of story ? If so this is great, b/c I don’t have to deal with after hours issues like SPY. I’ve had stuff go ITM nearly 1 hour after 4pm close and get assigned.


    • Hi Alex,
      Regarding SPX options, you have the specifics correct. At expiration will trade until 4pm, otherwise trade till 4:15. I’m not sure what exact index Cboe uses for the closing value, their specifications are a little vague, “the exercise-settlement value is calculated using the last (closing) reported sales price in the primary market of each component stock.” If a stock has a delayed closing it might shift the index slightly from the SPX or GSPC reported values. The effect you noticed where the final price tends to hover around a strike price is called pinning, it occurs because market makers are dealing with the very high deltas that occur on a option that is expiring close its strike price, the hedging they do tends to cause the underlying to hover right at the strike price.

      With SPY do you see OTM assignment at expiration or on options with time left. There are two factors that might impact SPY assignment, one is that the person exercising the option wants actual shares (calls) or wants to close out a short position (puts) in those cases they might not care about the after hours moves. The other is assignment due to ex-dividend dates, this usually happens the evening before the ex-dividend date and usually is associated with ITM options. I doubt this is what you are seeing.


      • Hi Vance,

        Thanks for your reply. The SPX index issue was the same thing I was wondering what you described. I have asked several people but have not really got a clear answer. My assumption is whatever Yahoo Finance prints at 4:00pm for GSPC is the ultimate price the strike is compared against.

        With the SPY, the issue I was referring to was an after hours pin move. So if the SPY option expires that day at with a strike of 370 put and it is 370.20 at 4pm, it will be worthless technically. However, I have held short options past close on expiration day and it will continue to trade after 4pm and by 5pm, be $369.70

        I believe most brokers cut off at 5:30pm for options instructions, so there is that 1.5 hrs past 4 which your position can become in the money and be subjected to pinning. The SPX is appealing if such that immediately at 4pm that’s it even if there is some extreme event at 4:00:01 pm and the market drops 10%.

  3. I am learning trading with SPXW. I noticed that the delta of the Call options are reducing much faster than the one of the Put options. For example, for January 8, 2020 series, for Call options, from 3225 with the delta of 0.5027 to 3285 with 0.1002, have a 60-points distance. For Put options, from 3220 with the delta of -0,4601 to 3110 with -0.1032, have a 110-points distance. What this situation is called? Why?

    • This difference is due to something we call the volatility smile. As you go out of the money with puts their prices decrease slower than you’d expect because people are aggressively buying them–driving up their price. This is reflected in higher implied volatility numbers. Since the S&P rarely “crashes” up people don’t pay as much for out of the money calls and hence have lower implied volatilities and the deltas drop faster than on the put side of things.

      • Thank you, Vance! I heard about the term “volatility smile” before, now I see it more clearer thanks to your explanation!

  4. Excellent info!
    I was wondering, cause I had an ITM short call on the Spx AM, and got an email today saying I have been assigned the short call, and my account is up $2500, equal to my max loss(horrible trade for me).
    But my point is, the spx doesn’t have any stock you could buy or sell… So how I solve this?

    • Hi Alejandro,
      Since SPX options are cash settled the impact to your account is a cash debit–there are no security shifts that happen. If this assigned option was part of an option combination (e.g. a spread) then you need to look to see if you still have open positions you want to take care of (e.g., a long SPX call further out). If so you can close them out yourself or add back in an SPX option to put the combination back into operation.

      Best Regards, Vance

  5.  Nice Article. I think you can trade in your IRA with at least 10k for spreads on indexes. I have been a big fan of the SPX but the spreads suck. I have not traded SPXPM might give it a chance. 


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