When I trade an index option (SPX), there is no actual trading going on in the underlying (as opposed to SPY).
But some option strategies (like covered call) by definition require a position in the underlying.
So how does one sell a covered call on SPX ?
You can buy some S&P futures or go one step further and buy the underlying stocks that compose the index (which is what future/cash arbitrageurs do). But unless you are interested in a very specific arbitrage, buying SPY and selling calls on SPY would by and large achieve the same outcome.
