There are many key differences and similarities in trading SPX and SPY, including settlement, tax rules, fees, and more.
SPX index options are cash-settled at expiration and do not take delivery of shares. This makes SPX particularly attractive to 0DTE traders, as they can close their positions cleanly at expiration without worrying about residual market exposure if they're assigned. SPX is also European-style, meaning there is no assignment risk before expiration.
SPY ETF options settle into physical shares of SPY. If a 0DTE trader is assigned and unwillingly holds a position overnight, they face exposure to price movements that can occur before the next trading session opens. These after-hours moves might be triggered by anything from economic reports to geopolitical developments, and they can lead to substantial, unexpected losses.
Equities and ETFs (like SPY) have physical settlement, meaning traders are obligated to accept 100 shares per contract if assigned or if the short option expires in-the-money (ITM). When trading these securities, the biggest risk is having a credit spread with the short option expiring in the money and the long option expiring out-of-the-money.

How does option assignment work?
The OCC facilitates the assignment process.
For example, if a stock is trading at $100 and you sell a 100 Put, the put buyer has the right to sell 100 shares at $100 any time until the options expire. If the stock is below $100 at expiration,you will be assigned 100 shares per contract and are obligated to purchase stok at $100 .
If a short option expires in-the-money, the broker sends a notice of exercise to the Options Clearing Corporation (OCC). The OCC randomly selects a clearing member firm that is short the exercised contract and assigns the firm the exercised option. The clearing member firm assigns the exercise to one of its customers holding the short option (either randomly or on a first-in, first-out basis). The assigned put writer must purchase the shares to fulfill the obligation of the assignment. The broker then delivers the put writer’s shares to the OCC, who delivers the shares to the broker whose customer initially exercised the put option.

What happens when an option spread expires partially in-the-money (ITM)?
When a short option expires ITM, you are obligated to accept shares. Short puts convert to long stock and short calls convert to short stock. If the long leg is also in-the money, it will be auto-exercised by the broker, and the shares will cancel out.
However, if only the short leg expires ITM, the long option will expire and no longer protect the assigned shares. This scenario puts traders at risk if a large gap occurs overnight before they can exit the position.
Many traders prefer to use credit spreads and iron condors for risk-defined 0DTE option positions, but those trades only maintain their risk profile if both legs expire in-the-money (ITM) and the long leg is exercised. Spreads that expire partially in the money can lead to significantly greater losses than expected.
Gap Risk
Consider a practical example and explain how assignment risk differs for SPX and SPY when the option contract expires at the end of the trading day.
What happens when SPX options expire?
- Position: A 0DTE SPX short put spread (short 5580 put, long 5540 put) that expires at the end of the day.Â

- At Expiration: If SPX closes above 5,580, the position realizes the maximum potential profit as both contracts expire OTM and worthless. If SPX closes below 5,540, both contracts will expire ITM and will be cash-settled to the maximum loss of the position. However, if SPX closes between 5,580 and 5,540, the short option would expire in-the-money, and the long option would expire out-of-the-money. In this case, we’d have to calculate the net partial profit/loss that gets settled to cash.

- Result: Let’s assume SPX closes at 5,570, and the short put spread received a net credit of $3.00 on entry. The final payout is then calculated as: (5580 - 5570) x 100 = $1,000, less the credit received ($300) = -$700 loss.
As you can see, since SPX settles in cash at expiration, even though the trade loses money, there was no overnight exposure, and the trader has no residual position. You’re not stuck with a partial assingment and underlying shares that can be affected by market movements the next day as is a risk for non-cash settled ticker symbols like SPY.
What happens when SPY options expire?
- Position: A 0DTE SPX short put spread (short 558 put, long 554 put) that expires at the end of the day.Â

- At Expiration: If SPY closes above 558, the position realizes the maximum potential profit as both contracts expire OTM and worthless. If SPY closes below 554, both contracts will expire ITM. The short option will be assigned and the long option will be auto-exercised by the broker; the position will realize the maximum loss. However, if SPY closes between 558 and 554, the short option would expire in-the-money, and the long option would expire out-of-the-money. In this case, the short put option would be exercised and the long put option would expire OTM. We would be assigned 100 shares per contract at a price of 558.

- Result: Let’s assume SPY closes at 556. The trader is now long 100 shares of SPY at a price of 558 ($55,800) going into the next trading day. The long 554P expires, and the trader has no option protection; the trade is no longer risk-defined. If any news or events affect the markets overnight, these shares are subject to gap risk, meaning they could open much lower or higher than the previous close.
If, for example, SPY opens at $550 the next day, the trader faces a loss of -$800 (less the original credit received) since 100 shares would now be worth $55,000. This exceeds any potential max loss the $4 wide position would have had before expiration. Of course, the loss could be even larger if SPY’s price moves more. Furthermore, the cost of carrying the position ($55,800) may be more than the available capital in the account, which could result in broker intervention to liquidate the position.