I have been trading SPY Options for more than 7 years.
Then in May of 2021, something happened to QQQ Options that changed my mind from that point forward.
Today I will be sharing my experience trading SPY vs QQQ Options so that you can learn from it in order to Take your Options Trading to the Next Level.
Table of Contents
SPY vs QQQ – The Popularity Contest
If you have been trading US stocks or options for awhile, chances are you have come to learn about SPY ETF (Exchange Traded Fund).
If not, you can certainly add to the popularity of this instrument over its tech peer QQQ.
According to Google trends, SPY is 10 times more popular in searches than QQQ with their respective score 62 (SPY in blue) vs 4 (QQQ).
The above view represents a comparative live worldwide view of SPY vs QQQ.
For non traders, this popularity contest presents QQQ as secondary trading instrument compared to ins counterpart SPY.
However, you and and I know than this could not be further away from the truth.
Therefore, one can really wonder what’s going on here ?
Let’s try to get you some answers below.
Who Trades SPY and QQQ
Let’s try to find out if Google Trends data may be skewed by the fact that the word
SPY can appear in searches not related to trading ( yeah there are movies about SPY – singular).
In order to do so, I researched data from two popular trading medium.
One is the social media of stock market known as Stocktwits.
The other is none other than the high profile growing trading platform Webull.
Both have this common trending indicator on how many traders are watching each specific stock.
Instead of just pure searches from Google, I now can present you the real attractiveness of SPY vs QQQ using real traders from Stocktwits and Webull trading platform.
Which one HAs the Edge SPY or QQQ ?
The “traders” numbers may not be as one sided in favor of SPY as Google Trends data but nonetheless, SPY is still clearly leading QQQ ETF.
Just in case you may be wondering what is the big deal about this data on which one of these two ETFs is more popular than the other, please allow me to remind you of the context.
Should you find out that one instrument you are interested in trading can provide more value than a similar counterpart, well you would have discovered an edge that you can take advantage of.
As you may know by now, having an edge is what trading is all about and my goal from this point on is to show you that one of these two has an edge over the other one.
|SPY||QQQ||SPY vs QQQ Ratio|
Once I establish that edge from data and my actual trading, all you will have left to do will be to emulate my Trading System to start making money consistently day trading one of these two ETFs.
First, let me show you some similarities between SPY and QQQ.
Similarities Between SPY and QQQ
Aside from the obvious fact that SPY and QQQ are both Exchange Traded Funds (ETF), they have a big common characteristic that you and I need to explore.
As ETFs, SPY and QQQ are tobe seen as a basket of selected stocks in which each stock has a weighting.
Think of this as ya basket of fruits where some of the fruits have a higher representations.
Such baskets can have 3 apples, 2 pears, one papaya, one orange , one pineapple 🙂
In this case, the fruits are stocks.
Therefore as the importance of some stocks grow higher so will the direction of the ETF be dictated by those stocks.
Now, what if I tell you that even though SPY represents 500 of the USA most powerful stocks, only a handful actually influence the direction of this ETF.
Furthermore, these very few stocks are the same ones that have the highest weighting on the Techs ETF QQQ.
In the Table below, I am summarizing the Top10 Holdings for SPY and QQQ with their respective weighting (importance) in each eTF.
|Rank||Stock||QQQ Weighting (%)||SPY Weighting(%)|
SPY vs QQQ Top Holdings Review
The first glance at this data reveals that the Top 8 stocks in terms of weight (importance) on both SPY and QQQ are identical.
Let’s spell these technologies stocks out so that it is crystal clear for all that trading (or investing for that matter) SPY or QQQ is basically trading technology stocks.
Apple | Microsoft | Amazon | Tesla | Alphabet | NVDA | Google | Facebook are the most important stocks inside the QQQ ETF.
These only 8 stocks accounts for 49% of the total ETF.
Yes, you are reading this correctly. This same group weights 26% inside of SPY.
Given that SPY has 500 stocks, I do not know about you but seeing that less than 2% of the stocks in SPY ETF account for more than a quarter (26%) of its price is a big eye opener.
In Summary, we have 8 stocks that drive QQQ each and every day while being of great importance in the broader market index SPY.
Hence, once could infer that SPY mostly derives its price from QQQ given that the latter is one of 11 sectors of SPY yet 8 of its stocks have a combined contribution of 26%.
Historical Returns of SPY vs QQQ
In my goal to prove that despite having similar Top 8 holdings, QQQ and SPY differ in their benefits for day traders, I would like to offer you Exhibit # 1 in the form of the the last 10 years returns for each ETFs.
QQQ vs SPY Chart Over Last 10 years
In the view below, I trended both QQQ and SPY from April 2011 to October 2021.
The top line is QQQ while the bottom line is SPY.
The results is very clear.
QQQ grew 527% over this timeframe vs 225% for SPY.
Which means that as an investor, you would have made 1.3 times more money investing in QQQ than in SPY.
From this data alone, QQQ offers a 134% edge over SPY.
Now, you may be thinking over 10 years is a long time and more importantly, how does this edge translate into day trading SPY vs QQQ.
Because after all, the main objective is to find an edge that is actionable in the immediate future.
QQQ vs SPY Charts Since 2020 | Best Era For Day Traders
In the above 10 year chart comparison of QQQ vs SPY, one detail that was not lost to my eyes is the acceleration of the growth starting in 2020.
We know that the pandemic brought a record number of new traders into the stock market in th e spring of 2020.
Is this the reason for the sudden spike in volatility ?
I am not so sure but regardless of the reason, I have data to show that the last 18 months have provided more opportunities for day traders to make money trading QQQ and SPY options.
More Volatility in QQQ and SPY since 2020
In my research for this article, I gathered daily price actions (Open, High, Low and Close) for QQQ and SPY from 2018 to now.
With this information, I was able to determine the average move (also know as the ATR or Average True Range) for each eTF.
The great insight I can provide is that I further broke these daily moves for QQ and SPY into bullish and bearish studies.
This means that I am able to tell by how much the average daily moves are on bullish days vs bearish days.
|Average Daily Bullish Move (QQQ)||Average Daily Bearish Move (QQQ)|
In comparison to 2018 and 2019, 2020 average daily volatility spike above 1.06% and -1.08%for bullish and bearish days respectively.
This means that options traders made more money day trading QQQ in both market conditions because the moves were bigger.
2018-2019 vs 2020-2021 Volatility
Though that trend subsided a little bit in early 2021, the recent numbers are still higher than 2018 and 2019 averages by at least 17% .
For the bullish days (+0.76% vs 0.65% in 2018-2019) and 26% for the bearish days (-0.92% in 2021 vs. 0.73% in 2018-2019).
Now, if I was able to provide similar data for SPY, we will really be able to determine which one of the two ETFs has an edge over the other one for day trading of options.
Lord behold, I have that data as well.
Here it is.
|Average Daily Bullish Move (QQQ)||Average Daily Bearish Move (SPY)|
What does the SPY Daily Average moves study from 2018 to 2021 tell us ?
A great deal.
SPY Volatility Spike in 2020
First of all, the same spike in 2020 we described on QQQ is also true in SPY when comparing volatility in 2018-2019 vs 2020-21.
So yeah SPY options traders have been makin more money recently over the last 18 months.
However, the meat of the data is the fact that QQQ daily moves even prior to 2020 are far higher than SPY average daily variations.
This is true for both the bullish and bearish days when we read the QQQ table and SPY table over the same year.
How much of an Edge does QQQ offer to Options Day traders ?
Here is the Summary view below year after year in each market condition.
|QQQ ATR better than SPY ATR by(%)||2018||2019||2020||2021|
The above table is the main take away I want to give you today on why day trading QQQ options over SPY Options is better for you as a trader.
On bullish days, QQQ options will give you in average 40% more profit compared to your fellow SPY traders.
In bearish days in 2021, that edge grows to 76% !
I do not know about you but that is all I need to make QQQ my favorite ETF to day trade Options with in 2021, 2022 and beyond.
There is just one major fact I need to reveal to you to fully close this tutorial.
What Makes SPY and QQQ Attractive for Options Day Traders
The main reason I trade SPY more than any other stock is the availability of mid week options.
Meaning that we do not have have to wait until Friday for Expiration.
Why does that matter ?
Because with closer Expiration date on Mondays, Wednesdays and Fridays, the cost of options is small.
Which menas that you do not need thousand of dollars to trade otpions.
Better yet, you may not even need hundreds of dollars to do so as illustrated in the short video below showcasing how I am able to trade very cheap options as low as with $1 !
How To Trade SPY Options for Profit
In case you are new to this blog, may I suggest you read this expose on how to trade SPY options for profit that I have been using to consistently get great results.
It is a very simple and effective technique that leverage the volatility of weekly options.
As supporting evidence, there are the many videos I shared on my YouTube channel about this very methodology on weekly SPY Options.
WHY IS QQQ Options Trading More Lucrative Than SPY Since MAy 2021
Since 2018, SPY has been the only ETF to provide mid-week expiration for options.
Until May of 2021 when Market Makers finally decided to to introduce Mondays | Wednesdays | Fridays Expiration for QQQ options.
This is a big game changer for this options trader.
Remember how I spent the majority of this discussion explaining that QQQ daily move are higher than SPY ones ?
Consequently, with the introduction of mid-week options on QQQ, this means that QQQ traders will make more money day trading QQQ options on expiration days in lieu of SPY.
QQQ vs SPY Story Inside My Discord Room
That is exactly what I have been doing since the first week of May 2021.
Even though I still keep an eye on SPY, 99% of my day trade on Mondays, Wednesdays and Fridays expiration have been on QQQ.
Do not get me wrong, there is still money to be made on SPY Options on expiration day
However, since the research data I provided earlier shows that there is even more money to be made day trading QQQ options on Expiration days, why not focus exclusively on this technology ETF.
SPY vs QQQ | Change of Discord Room Name
Let me share this cute story from last week regarding SPY vs QQQ options trading.
One of the Room in My Discord channel is was named “The SPY that Pays Us” when I first created the channel.
Recently, given the slew of QQQ options trades we have been enjoying ( see videos on YouTube here ), Nick a new trader simply asked me: “Why are we still calling this channel the SPY that Pays US ?
I did not even think about it twice and said: yeah, I agree.
We needed a name change and so we did.
The new room where I post the strategies related solely to QQQ is called ” The QQQ that Pays US” 🙂
Statistics of Numbers of Trades SPY vs QQQ
Just from may Discord channel using the Data posted in the newly renamed “The QQQ that Pays US” room, I have gathered all the outstanding trade on QQQ since early May.
The data features 30 trades on QQQ with average profit of 760% !
Our strategy consist of entering trade on Gaps in the morning .
We setup strangle with strike price about $3 away from current price in each directions.
Then at the close, we can do a similar technique in the last hour or simply follow the closing momentum.
This second part has its best results on expiration days Mondays , Wednesdays and Fridays.
The beginning of the Day technique can works on Tuesday and Thursdays.
Such was the case today , yeah as I am finishing this SPY vs QQQ debate.
I trade the SEpt29 365 Puts that went from 48 cents yesterday at close to almost $6.
For a Day trade entry, you would have most likely ended up with 500% to 600% profit.
I provided multi year research that showed that QQQ options traders are better off with this ETF rather than SPY.
Hopefully this settle the proverbial question you may have had prior to learning about SPY vs QQQ for 2022.
I also introduced my methodology on how I like making money trading QQQ Options.
Should you want to learn more, I strongly invite you to join our 10-baggers Trading System.
I will help you Master The Insights into Making a Living Trading QQQ options in 2022 and beyond.