What is the Spy ETF?
The SPDR S&P 500 ETF (SPY) is an Exchange-traded fund. The SPY ETF seeks mirror the performance of the S & P 500 Index. The SPY ETF offers exposure to companies that are in the S & P 500 index. The Spy ETF does not seek to gain or lose money it seeks to perform just as the index that it tracks.
What is the S & P 500 Index?
The S&P 500 (Standard & Poor’s 500) Index is an index that is based on the market capitalization of 500 large companies having common stock listed on the NYSE or NASDAQ. Many people consider the S&P Index one of the best representations of the US stock market. Standard & Poor’s index began in 1957.
Can a trader trade SPY Options?
When trading options some things are just not worth it. Options have high volatility. A trader might be up 20% one second and down 50% the next when trading options. This can be fool’s gold. The main problem with some options is the difference in the bid/ask spread. If a stock or ETF does not have much volume usually the options bid/ask is so wide that just a purchase of that option would put the trader at more that 10% loss. When the trader goes to sell they would lose another 10% on that trade. A trader would have to make 21% to just break even. The SPY ETF has enough volume that the difference in the bid/ask make it ok to use to trade options.
Trend Following SPY
The SPY ETF is a good index to follow with your long-term trend following strategy. Historically the S&P index and the SPY ETF have performed well when used in a long-term trend following system.
As you can see in the above chart the S&P 500 (SPY) ETF is a very good index to use when trend following long-term. So the SPY ETF is a good ETF to use in a trend following model. With trend following it really does not matter if a stock or ETF is going up or down it just needs to move in one direction for an extended period of time.