What are Index Options?

An Index Option is a contract that gives the buyer (the owner or holder) the right to buy or sell the value of the underlying index at a specified strike price.

As Index Options are cash-settled, there is no physical delivery of the underlying security. Instead, upon expiration, a cash settlement is paid out to the holder based on the difference between the exercise settlement value and the strike price.

Index Options are also European style options and can only be exercised on the designated expiration date.