Aug 8, 2022
what is an index option?
An index option is a financial derivative that gives the holder the right (but not the obligation) to buy or sell the value of an underlying index such as the S&P 500 index, at the stated exercise price. No actual stocks are bought or sold. Often, an index option will utilize an index futures contract as its underlying asset.
Index options are always cash-settled and are typically European style options, meaning they settle only on the date of maturity and have no provision for early exercise.