3 Things You Probably Didn't Know About the SPDR S&P 500 ETF Trust (SPY)

It has a fixed termination date

SPY isn’t structured like most modern ETFs. Instead, it operates as a unit investment trust (UIT)—a structure that was cutting-edge in the early '90s but is now largely considered outdated. Unlike open-ended ETFs, UITs are more rigid.

One quirky consequence? SPY has a fixed termination date. According to the fund’s prospectus, SPY is scheduled to terminate on whichever comes first:

(a)    January 22, 2118

(b)    20 years after the death of the last surviving member of a group of eleven individuals named in the original trust agreement—individuals born between 1990 and 1993.

Yes, SPY literally has a human countdown built into its legal structure. Why the morbid clause? It’s a standard workaround rooted in old trust law (“the rule against perpetuities”) to define the maximum length a trust can legally operate. These “measuring lives” serve as a timeline trigger.

In practical terms, the odds are high that this clause will be amended or the fund restructured long before it ever sunsets. But if it isn't, and SPY survives into the 22nd century, trustees will eventually have to decide its fate. Not that any of us will likely be around to see it.

It cannot reinvest dividends

Another quirky limitation of SPY’s unit investment trust (UIT) structure is that it can’t reinvest dividends internally and must hold them as cash until distribution dates.

Most modern ETFs distribute all income to shareholders by year-end, as required. But in the meantime, especially for funds that pay quarterly, they can reinvest dividends internally. This reinvestment helps reduce cash drag and keeps the ETF more fully invested, which can slightly boost performance in rising markets.

SPY doesn’t have that flexibility. Instead, when companies in the S&P 500 pay dividends, SPY holds those payments in cash until its next scheduled distribution.

That cash earns a bit of interest, but it also means SPY is never 100% invested—there’s always some cash sitting on the sidelines. While this might offer a tiny buffer in a downturn, it can also cause SPY to lag slightly in bull markets compared to peers like VOO.

UITs were the best legal framework ETF pioneers could work with in 1993. But they came with rigid rules: no dividend reinvestment, no securities lending, no ability to add new holdings outside the index. As a result, SPY still operates under the original constraints baked into its design more than 30 years ago.

It has zero day to expiry (0DTE) options

As one of the earliest ETFs ever launched, SPY had a massive head start, and that first-mover advantage didn’t just attract assets. It also helped cement SPY as the most liquid, most heavily traded ETF in the world. So, when options trading on ETFs took off, SPY was the natural go-to.

Today, that’s reflected in SPY’s extremely deep and developed options chain. It offers a wide range of strike prices and expiries that stretch out as far as two years. But perhaps most notably, SPY has options that expire every single trading day: so-called zero day to expiry (0DTE) options.

This is rare. Most ETFs that trade options offer biweekly expiries. The more liquid ones might have weekly options. Only a select few, like SPY and QQQ, offer daily expirations.

Why does this matter? It makes SPY highly appealing to short-term traders, especially those looking to generate income or make bets on intraday price moves.

Yield-chasers, in particular, use 0DTE options to sell ultra-short-term premium, collecting small amounts of income on very short timeframes. It’s not without risk, but for experienced traders, SPY’s daily options provide flexibility and liquidity that few other ETFs can match.

Please note that this article reflects the author’s personal views and does not represent the opinions of the publication or its affiliates. It is for informational purposes only and does not constitute investment advice. It is essential to seek guidance from a registered financial professional before making any investment decisions.