These tickers (SPY, SPX, /ES) are all based off the S&P 500 yet the relative lows and highs diverge. Can someone provide a basic explanation what causes this to happen? I feel like it may stem from my having a basic lack of understanding on what the tickers represent or how they move. I'm aware SPY has dividends (quarterly?) that will jar its price overnight while the others do not.

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    SPX is the index itself, SPY is an ETF that tracks the SPX, all your ES are stock market index futures. So they are all three different devices. If nobody answers complete I'll try to write up one tomorrow when I have more time.
    – Ross
    Commented Sep 29, 2015 at 16:20

5 Answers 5


I thought the other answers had some good aspect but also some things that might not be completely correct, so I'll take a shot.

As noted by others, there are three different types of entities in your question: The ETF SPY, the index SPX, and options contracts.

First, let's deal with the options contracts. You can buy options on the ETF SPY or marked to the index SPX. Either way, options are about the price of the ETF / index at some future date, so the local min and max of the "underlying" symbol generally will not coincide with the min and max of the options. Of course, the closer the expiration date on the option, the more closely the option price tracks its underlying directly. Beyond the difference in how they are priced, the options market has different liquidity, and so it may not be able to track quick moves in the underlying. (Although there's a reasonably robust market for option on SPY and SPX specifically.)

Second, let's ask what forces really make SPY and SPX move together as much as they do. It's one thing to say "SPY is tied to SPX," but how? There are several answers to this, but I'll argue that the most important factor is that there's a notion of "authorized participants" who are players in the market who can "create" shares of SPY at will. They do this by accumulating stock in the constituent companies and turning them into the market maker. There's also the corresponding notion of "redemption" by which an authorized participant will turn in a share of SPY to get stock in the constituent companies. (See http://www.spdrsmobile.com/content/how-etfs-are-created-and-redeemed and http://www.etf.com/etf-education-center/7540-what-is-the-etf-creationredemption-mechanism.html)

Meanwhile, SPX is just computed from the prices of the constituent companies, so it's got no market forces directly on it. It just reflects what the prices of the companies in the index are doing. (Of course those companies are subject to market forces.)

Key point: Creation / redemption is the real driver for keeping the price aligned. If it gets too far out of line, then it creates an arbitrage opportunity for an authorized participant. If the price of SPY gets "too high" compared to SPX (and therefore the constituent stocks), an authorized participant can simultaneously sell short SPY shares and buy the constituent companies' stocks. They can then use the redemption process to close their position at no risk. And vice versa if SPY gets "too low."

Now that we understand why they move together, why don't they move together perfectly. To some extent information about fees, slight differences in composition between SPY and SPX over time, etc. do play. The bigger reasons are probably that (a) there are not a lot of authorized participants, (b) there are a relatively large number of companies represented in SPY, so there's some actual cost and risk involved in trying to quickly buy/sell the full set to capture the theoretical arbitrage that I described, and (c) redemption / creation units only come in pretty big blocks, which complicates the issues under point b.

You asked about dividends, so let me comment briefly on that too. The dividend on SPY is (more or less) passing on the dividends from the constituent companies. (I think - not completely sure - that the market maker deducts its fees from this cash, so it's not a direct pass through.) But each company pays on its own schedule and SPY does not make a payment every time, so it's holding a corresponding amount of cash between its dividend payments. This is factored into the price through the creation / redemption process. I don't know how big of a factor it is though.


As Ross says, SPX is the index itself. This carries no overheads. It is defined as a capitalization-weighted mixture of the stocks of (about) 500 companies.

SPY is an index fund that tries to match the performance of SPX. As an index fund it has several differences from the index:

  • It is NOT the index in that it cannot acquire 100% of the share capital of all 500 companies that make up the index. As you can see from the screenshot below (taken from here), the fund "only" has a capitalization of USD 166.61B, is significantly less than the USD 2.2T of the whole index.

enter image description here

  • It has turnover. That means it buys and sells shares, based on the movements of the capitalizations of all the constituent companies. SPY itself has a turnover of 3.54% per annum. That means that, at any given time, the makeup of the index will be different from the fund. Trades take time to execute (and decide on what to execute, when).

enter image description here

  • Funds have expenses. As you can see from the table above, the fund takes out 0.09% of all holdings every year to cover its management costs (and make a profit).
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    want to add in why the futures contract behaves different? It will be an excellent answer
    – CQM
    Commented Sep 29, 2015 at 19:08
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    Whats the point of having SPY then? Its stated goal is to match performance of SPX, but it inherently has more expenses. Why wouldnt I just invest directly into SPX? Commented Sep 29, 2015 at 20:39
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    @DavidGrinberg: because that would be way more expensive for you as an individual investor. SPX is not actually available for purchase, so you'd have to make up your own index fund.
    – Peter K.
    Commented Sep 29, 2015 at 20:52
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    This answer has some good information but is also appears wrong in some points. For example, SPX only rebalances once per quarter. That cannot explain the differences throughout the year. The ability to capture all of the market cap is also - as far as I can see irrelevant. See my answer regarding creation / redemption. Expenses matter, but I think that's got to be a small effect. It would also tend to make SPY underperform consistently, where as that's not the case at every point where the two don't track together perfectly.
    – user32479
    Commented Sep 29, 2015 at 22:21
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    Yeah I was specifically thinking of something like Robinhood... (or maybe IB???) some enterprising new company would be needed. I'm not saying it would be completely free, but it seems like with technology, the underlying cost of buying 100 shares of SPY versus buying tiny fractional amounts of many stocks could be reduced greatly.
    – user12515
    Commented Apr 12, 2017 at 19:23

The S&P 500 is an index. This refers to a specific collection of securities which is held in perfect proportion. The dollar value of an index is scaled arbitrarily and is based off of an arbitrary starting price. (Side note: this is why an index never has a "split").


Lets look at what assumptions are included in the pricing of an index:

All securities are held in perfect proportion. This means that if you invest $100 in the index you will receive 0.2746 shares of IBM, 0.000478 shares of General Motors, etc. Also, if a security is added/dropped from the list, you are immediately rebalancing the remaining money.

Zero commissions are charged. When the index is calculated, they are using the current price (last trade) of the underlying securities, they are not actually purchasing them. Therefore it assumes that securities may be purchased without commission or other liquidity costs. Also closely related is the following.

The current price has full liquidity. If the last quoted price is $20 for a security, the index assumes that you can purchase an arbitrary amount of the security at that price with a counterparty that is willing to trade.

Dividends are distributed immediately. If you own 500 equities, and most distributed dividends quarterly, this means you will receive on average 4 dividends per day.

Management is free. All equities can be purchased with zero research and administrative costs.

There is no gains tax. Trading required by the assumptions above would change your holdings constantly and you are exempt from short-term or long-term capital gains taxes.


Each one of these assumptions is, of course, invalid. And the fund which endeavors to track the index must make several decisions in how to closely track the index while avoiding the problems (costs) caused by the assumptions. These are shortcuts or "approximations". Each shortcut leads to performance which does not exactly match the index.

Management fees. Fees are charged to the investor as load, annual fees and/or redemptions.

Securities are purchased at real prices. If Facebook were removed from the S&P 500 overnight tonight, the fund would sell its shares at the price buyers are bidding the next market day at 09:30. This could be significantly different than the price today, which the index records.

Securities are purchased in blocks. Rather than buying 0.000478 shares of General Motors each time someone invests a dollar, they wait for a few people and then buy a full share or a round lot.

Securities are substituted. With lots of analysis, it may be determined that two stocks move in tandem. The fund may purchase two shares of General Motors rather than one of General Motors and Ford. This halves transaction costs.

Debt is used. As part of substitution, equities may be replaced by options. Option pricing shows that ownership of options is equivalent to holding an amount of debt. Other forms of leverage may also be employed to achieve desired market exposure. See also: beta.

Dividends are bundled. VFINX, the largest S&P 500 tracking fund, pays dividends quarterly rather than immediately as earned. The dividend money which is not paid to you is either deployed to buy other securities or put into a sinking fund for payment.


There are many reasons why you can't get the actual performance quoted in an index. And for other more exotic indices, like VIX the volatility index, even more so. The best you can do is work with someone that has a good reputation and measure their performance.

  • This is true for some ETFs, but it is not so much true for SPY (among others) due to the creation / redemption process. See my answer and also etf.com/etf-education-center/…
    – user32479
    Commented Sep 29, 2015 at 22:26
  • @brick Good point, the redemption process nullifies the block purchase, substitution and debt items mentioned here. The remaining items still apply and are of course minor. Also ETFs rock. Commented Oct 2, 2015 at 15:14

What you should compare is SPX, SPY NAV, and ES fair value.

Like others have said is SPX is the index that others attempt to track.

SPY tracks it, but it can get a tiny bit out of line as explained here by @Brick . That's why they publish NAV or net asset value. It's what the price should be. For SPY this will be very close because of all the participants. The MER is a factor, but more important is something called tracking error, which takes into account MER plus things like trading expenses plus revenue from securities lending. SPY (the few times I've checked) has a smaller tracking error than the MER. It's not much of a factor in pricing differences.

ES is the price you'll pay today to get SPX delivered in the future (but settled in cash). You have to take into account dividends and interest, this is called fair value. You can find this usually every morning so you can compare what the futures are saying about the underlying index. http://www.cnbc.com/pre-markets/

The most likely difference is you're looking at different times of the day or different open/close calculations.


As a futures trader, I can tell you that the highs and lows for the ES futures diverge simply because they trade around the clock, from 6PM ET to 5PM ET the next day. The SPX is only open during market hours, as is the SPY, but the SPY also trades in the extended hours sessions for about 3.5 hours before and after the regular hours of 930 AM ET to 4PM ET ET. So bottom line, while they pretty much track each other, the difference in their trading hours results in the highs and lows being different.

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