Educational only, not tax or financial advice. Tax treatment (including Section 1256) is complex and situation-specific — consult a qualified professional. Product specs and settlement rules can change; verify current details.
SPY, SPX, XSP, QQQ, and IWM all offer daily 0DTE options, and each trades a different mix of size, settlement, tax treatment, and volatility. There’s no universal best — here’s how to pick for your account and style.
The lineup at a glance
SPY — broad S&P 500, retail-sized, most liquid/tightest spreads, physically-settled (shares if held ITM). The default. SPX — full-size S&P index option (~10× SPY), cash-settled, possible 1256 tax treatment, but large per contract. XSP — Mini-SPX (~SPY-sized), cash-settled, potential 1256 tax, lighter liquidity. QQQ — Nasdaq-100, more volatile, tech-heavy. IWM — Russell small-caps, rate/sentiment-sensitive, volatile.
How to match one to you
Want maximum liquidity and simplicity? SPY. Larger account, want cash settlement + tax treatment? SPX. Want SPX-style settlement/taxes in a small size? XSP. Want more volatility / tech exposure? QQQ. Want small-cap, risk-sentiment volatility? IWM. Match the vehicle to your account size (SPX is large), your tax situation (index options may qualify for 1256 — consult a pro), your liquidity needs (SPY wins), and your volatility appetite (QQQ/IWM run hotter).
The “best” index is the one whose size, settlement, taxes, and volatility fit your account and temperament. SPY is the safe default; the others are deliberate trade-offs.
The default — and where NoVo fits
For most scalpers, especially starting out, SPY is the sensible default — unmatched liquidity, tightest spreads, and the deepest tool ecosystem — and it’s exactly what NoVo maps. The others are worth graduating to for specific reasons (tax, size, volatility). The dealer structure and 0DTE discipline apply to all of them; NoVo draws its map on SPY, QQQ and IWM — the three most liquid ETFs of the group.