An index option is an option contract based on an index of assets as the Underlying instrument. Typically these will be stock indices such as the S&P 500, Russell 2000, FTSE, DAX etc but they might also be others such as the VIX (Volatility Index) which measures the ratio of put to call Options.
Index Options are usually cash-settled, this means that if the option expires In The Money then the Option Writer will be obliged to pay the option owner money rather than deliver stocks, commodities etc. Most index Options are European Style so they cannot be exercised before expiry.
Contributed by: Ralph Windsor
Index Options are usually cash-settled, this means that if the option expires In The Money then the Option Writer will be obliged to pay the option owner money rather than deliver stocks, commodities etc. Most index Options are European Style so they cannot be exercised before expiry.
Related Directory Entries
External Links
Equity vs. Index Optionshttp://www.optionseducation.org/strategies_advanced_concepts/advanced_concepts/index_options/equity_vs_index_options.html
OIC article on the difference between stock and index options.
View OIC Options Glossary in Options Market Glossary Directory
SPX & Stock Index Optionshttp://www.cboe.com/micro/spx-stock-index-options.aspx
CBOE article describing index options with reference to SPX (the S&P 500 index).
View CBOE Options Dictionary in Options Market Glossary Directory
Index Optionhttp://www.investopedia.com/terms/i/indexoption.asp
Investopedia article defining index options.
Comments
There are currently no comments for this term.
Post a Comment
You must be registered and logged in to post a comment.