Managed by State Street (SSGA), it is the first ETF listed in the US and tracks the S&P 500 index one-to-one. Because it is structured as a Unit Investment Trust (UIT), it differs in some respects from a typical open-end ETF, including its dividend reinvestment policy.

It suits short-term traders and hedge managers who actively use its liquidity and options market, as well as long-term investors who want a standard core holding.

It is a passively managed (index-tracking) ETF run by SPDR (State Street).

The fund uses a passive strategy of fully replicating the S&P 500, holding every constituent at its index weight. The UIT structure gives it less flexibility to change holdings, but tracking error is small. Dividends are paid quarterly, and under the reinvestment policy there are periods in which part of the dividend is held as cash.

• The first ETF ever launched in the global ETF market
• A core ETF with very active options and futures markets
• A standard asset for institutional trading and hedging

Assets under management (AUM) stand at $813.6B, and the expense ratio is 0.09% per year.

Compared with VOO, IVV and SPYM, which track the same S&P 500, its fee is somewhat higher. However, SPY offers very deep liquidity in daily trading value and options open interest.

It moves in step with US large-cap stocks as a whole and has followed an upward trend over the long term. Short-term swings are influenced by interest rates, earnings season and moves in big tech heavyweights, and money flows in the options market are also reflected in short-term prices.

It belongs to the group of mega ETFs that draw strong institutional hedging and trading demand along with core-holding inflows. During volatile markets, capital turnover as a hedging tool can become especially pronounced.

Its main strengths are deep liquidity and a deep options market, while its weakness is a fee somewhat higher than other ETFs tracking the same index.

VOO, IVV and SPYM shown in the table are lower-cost, direct substitutes that track the same S&P 500, while VTI offers exposure to the entire US market, including small and mid-cap stocks. Variants worth considering as well include RSP, which holds the same S&P 500 at equal weight, SPYG for the growth style, SPYV for the value style, and OEF, which concentrates on the largest stocks only.

Here are the points to review before investing in SPY. Liquidity and options are its strengths, but it is advisable to double-check the fee cost, the characteristics of the UIT structure and currency effects before buying, and to compare alternatives according to your holding purpose (short-term trading or long-term holding).

Large-cap concentration and exchange rate fluctuations are the main drivers of short-term volatility. Investors should also be aware in advance that, because of the UIT structure, there are periods of cash holdings, so tracking efficiency in a strong bull market may be somewhat lower than that of open-end ETFs.

If liquidity and the options market are the priority, SPY is regarded as the standard choice. If minimizing cumulative long-term costs comes first, lower-cost direct substitutes such as VOO, IVV and SPYM are the more suitable options.