Options Traders Prefer SPY Over Other S&P 500 ETFs

The SPDR S&P 500 ETF (NYSEArca: SPY), iShares Core S&P 500 ETF (NYSEArca: IVV) and the Vanguard 500 Index (NYSEArca: VOO) are three of the biggest ETFs in the world and each, as their names imply, track the S&P 500.

Both IVV and VOO feature lower fees than SPY, which has helped propel growth for those products. In fact, IVV is the only other ETF in the world besides SPY that has over $100 billion in assets under management. Still, SPY remains a favorite of institutional and professional traders and earlier this month the ETF topped $300 billion in asset under management. SPY is also the preferred S&P 500 ETF among options traders.

“However, there’s one area where IVV still simply does not compete with SPY — specifically, in the realm of options,” said Schaeffer’s Investment Research. “Since we last checked in on IVV, its AUM has grown by roughly 50%, driven by approximately $32 billion in net inflows… but options open interest has actually dropped by about 16% from last February’s levels, to a meager 4,269 or so contracts. The top open interest strike, IVV’s February 275 call, carries open interest of just 303 contracts.”

SPY has become the market’s go-to investment vehicle for both core and tactical exposure, especially among large institutional traders who want to quickly and efficiently go in and out of the market – SPY is the only ETF traded with a bid-ask spread of just a penny for more than 12 consecutive years.