SPY is the SPDR S&P 500 ETF — a fund you can buy shares of. SPX is the S&P 500 index itself, which you can't buy directly but can trade options on. Both track the same 500 companies, but their options contracts differ in ways that matter.
The key differences
SPX is roughly 10x the size of SPY (it tracks the index level, ~$5,000+, vs SPY's ~$500), so one SPX contract ≈ ten SPY contracts — fewer contracts, fewer commissions for size. SPX options are European-style and cash-settled (no early assignment, no shares change hands), while SPY options are American-style and settle into ETF shares.
The tax difference
SPX options are §1256 contracts, taxed at the favorable 60% long-term / 40% short-term blended rate regardless of holding period. SPY options are taxed as regular short-term gains for active traders. For a high-volume trader, that tax treatment alone can be a meaningful edge for SPX — though it depends on your situation, and this isn't tax advice.
Same index, three real differences: size, settlement, and taxes. For active size, they add up.
Which suits whom
SPY suits smaller accounts and anyone wanting flexibility, tight strikes, and the ability to trade shares — plus deep liquidity and penny-wide spreads. SPX suits larger, active traders who want cash settlement, no early-assignment risk, and the tax treatment. NoVo trades SPY options — the accessibility, granularity, and liquidity fit a systematic, any-size approach.