SPX, XSP and NDX: Index Options for US Traders, and Why They Get Automated
Options on the S&P 500 index (SPX), its one-tenth-sized sibling (XSP) and the Nasdaq-100 index (NDX) are among the most traded contracts in the US. They look like SPY and QQQ options on a screen, and they behave differently in the three places that matter to a rule-based trader: how they settle, when they can be exercised, and when they stop trading.
This is a rewrite of an older post of ours, with the facts US traders ask about and the reasons these contracts suit automation. Nothing here is a recommendation to trade them.
The contracts
| SPX | XSP | NDX | SPY / QQQ (for comparison) | |
|---|---|---|---|---|
| Underlying | S&P 500 index | S&P 500 index ÷ 10 | Nasdaq-100 index | SPDR S&P 500 ETF / Invesco QQQ ETF |
| Multiplier | $100 | $100 on one-tenth of the index | $100 | $100 on the ETF price |
| Settlement | cash | cash | cash | shares |
| Exercise | European (at expiry only) | European | European | American (any time) |
| Regular trading ends | 4:15 pm ET | 4:15 pm ET | 4:15 pm ET | 4:15 pm ET (ETF options) |
| Same-day expiries | every weekday | every weekday | every weekday | every weekday |
Multipliers and listing schedules are set by Cboe and Nasdaq and change occasionally; check the exchange's contract specifications before building a strategy around them.
Why these three facts change how you write rules
Cash settlement. An in-the-money SPX or XSP option at expiry becomes a cash debit or credit, never shares. A strategy that holds a short spread into the close needs no rule for "what if I am assigned stock." On SPY and QQQ it does. Our SPY 0DTE condor guide spends a whole section on that difference.
European exercise. No early assignment means a short index option stays an option until expiry. Rules about ex-dividend dates and deep-in-the-money shorts, which matter on ETF options, do not apply.
The 4:15 pm ET close and the overnight session. Index options keep trading for fifteen minutes after stocks close, and SPX and XSP have a global trading hours session overnight. A time exit written as "at the close" is ambiguous; write it as a clock time in ET and decide whether your strategy evaluates overnight at all.
Size. One SPX contract controls roughly $100 times the index level, a six-figure notional; XSP is one-tenth of that. For testing a defined-risk structure with one contract, XSP is the usual choice, and the same rules move to SPX by changing the underlying.
Taxes. Broad-based index options such as SPX, XSP and NDX are generally treated as Section 1256 contracts, taxed 60% long-term and 40% short-term regardless of holding period, with mark-to-market at year end. SPY and QQQ options are not. This is not tax advice; the treatment of your account is a question for a tax adviser.
Why index options get automated
Three reasons come up again and again among traders who move index strategies to rules.
- The decisions are repetitive. A same-day credit spread sold at 10:00 am ET with a stop, a target and a 3:45 pm ET exit is the same decision five days a week. People get tired; a rule does not.
- The exits must be exact. On a 0DTE contract the difference between closing at 3:45 pm ET and 4:05 pm ET can be the difference between a small loss and the full width of the spread. A time exit in software fires at the time written.
- The log replaces the memory. After a bad week, "what did I actually do on Tuesday" has a precise answer when every decision was a logged rule.
What automation does not do is make an index strategy safer. The maximum loss of a defined-risk spread is the same whether a person or a program sold it, and a gap through the short strike is a gap either way.
Building an index strategy on Tradetron
The builder treats SPX, XSP and NDX like any other option underlying: pick the index, the expiry (same-day, weekly or monthly), and the legs with strike rules relative to the index level. Exits are per leg or for the whole strategy, in dollars of P&L, plus a square-off time in ET and a daily loss limit.
Then test in order. Backtest on the minute-level option data Tradetron keeps for SPX, SPY, QQQ, NDX and XSP, 0DTE to monthlies, with your costs set.
Run it Live Offline on real sessions: live index prices, every trade shown, no order sent, no broker needed. Four weeks of Live Offline, step by step. Then connect a broker that offers index options with the approval level you need and deploy with one contract. What happens to your orders.
Frequently asked questions
Is XSP just a smaller SPX?
Close to it. XSP tracks one-tenth of the S&P 500 index with the same cash settlement and European exercise. Strike spacing, liquidity and quoted spreads differ, so test on the contract you will actually trade.
Can I trade index options on every connected broker?
Most of the nine US brokers Tradetron connects to offer SPX and XSP options; approval levels for spreads vary, and NDX is less widely offered. Check the broker's own list.
Does Tradetron support the overnight SPX session?
The strategy evaluates when its market is open and the settings allow it. Decide explicitly whether your rules run overnight, and set the entry window in ET accordingly.
