Index Option

A financial derivative that gives the holder the right, but not the obligation, to buy or sell a basket of stocks, such as the S&P 500, at an agreed-upon price and before a certain date. An index option is similar to other options contracts, the difference being the underlying instruments are indexes. Options contracts, including index options, allow investors to profit from an expected market move or to reduce the risk of holding the underlying instrument.

Index options provide diversification as investors are exposed to a large number of securities in one trading instrument. The degree of exposure varies with the particular index option. Popular index options include S&P 500 Index Options (SPX), Dow Jones Industrial Average Index Options (DJX) and Nasdaq-100 Index Options (NDX). Index options are typically cash settled.


Investment dictionary. . 2012.

Look at other dictionaries:

  • index option — see option 3 Merriam Webster’s Dictionary of Law. Merriam Webster. 1996 …   Law dictionary

  • Index option — A call or put option based on a stock market index. The New York Times Financial Glossary * * * index option index option ➔ option * * * index option UK US noun [C] ( also stock index option) ► FINANCE an investment base …   Financial and business terms

  • index option — A call or put option based on a stock market index. Bloomberg Financial Dictionary * * * index option index option ➔ option * * * index option UK US noun [C] ( also stock index option) ► F …   Financial and business terms

  • stock-index option — ➔ option * * * stock index option UK US noun [C] FINANCE, STOCK MARKET ► INDEX OPTION(Cf. ↑index option) …   Financial and business terms

  • Stock market index option — is a derivative financial instrument.The global market for exchange traded stock market index options is notionally valued by the Bank for International Settlements at $368,900 million in 2005.A stock index option provides the right to trade a… …   Wikipedia

  • Multi Index Option — A type of investment in which the payoff depends on the difference in performance between two indexes or other financial assets. The payoff from the option is governed by the change in the spread between the indexes or assets. These options are… …   Investment dictionary

  • Stock index option — An option in which the underlying is a common stock index. The New York Times Financial Glossary * * *    A call or put option on a stock index.    ► See also Option …   Financial and business terms

  • stock index option — An option in which the underlying is a common stock index. Bloomberg Financial Dictionary * * *    A call or put option on a stock index.    ► See also Option …   Financial and business terms

  • option — op·tion 1 / äp shən/ n 1: the power or right to choose; also: a choice made or available 2: a privilege of demanding fulfillment of a contract on any day within a specified time 3: a contract conveying in exchange for the payment of a premium a… …   Law dictionary

  • Option (finance) — Stock option redirects here. For the employee incentive, see Employee stock option. Financial markets Public market Exchange Securities Bond market Fixed income …   Wikipedia

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