Index option

Index option

A call or put option based on a stock market index.

Index Option

A call or put option contract in which the underlying asset is an index of any sort. For example, in a call, an investor may buy the right to an index on or before the expiration date at a certain strike price. Obviously, one cannot buy or sell a physical index, so the underlying asset is said to be the dollar value of an index at a certain date and time multiplied by $100. Because physical delivery is not possible, when a stock index option is exercised, the delivery is the cash value of the strike price. See also: Exchange-traded fund, Index fund.

index option

A call option or put option with a specific index as the underlying asset. For example, a call option on the S&P 500 gives the option buyer the right to purchase the value of the index at a fixed price until a predetermined date. Index options provide a means to leverage a bet on the future direction of the market or of a particular industry segment without purchasing all the individual securities. Use of the option can entail considerable risk for an investor.

Index option.

Index options are puts and calls on a stock index rather than on an individual stock. They give investors the opportunity to hedge their portfolios or speculate on gains or losses in a segment of the market.

For example, if you own a group of technology stocks but think technology stocks are going to fall, you might buy a put option on a technology index rather than selling short a number of different technology stocks.

If the value of the index does fall, you could exercise the option and collect cash to partially offset a drop in the value of your portfolio.

However, to use this strategy successfully, the index you choose must perform the way the portion of the portfolio you're trying to hedge performs.

And since changes in an index are difficult to predict, index options tend to be volatile. The more time there is until an index option expires, the more volatile the option tends to be.

Mentioned in ?
References in periodicals archive ?
The NYSE FANG+ Index Option contract will trade in the United States exclusively on the NYSE's options markets, NYSE Arca and NYSE American, beginning Monday, June 11.
NYSE to launch FANG+ options on June 4
Index option Tips is especially designed for those traders who trade in index options.
MarketMagnify Stock Advisory Company in Indore
The index option contract is an arrangement between the seller and the buyer in which the buyer has the right to buy or sell a security /index at the fixed time in future at a price stipulated at present.
PSX launches index based option contracts
This paper adopts Maximum Likelihood Estimation (MLE) to estimate Heston model parameters and test pricing efficiency using Hang Seng Index Option data.
Improved Maximum Likelihood Estimation of Heston Model and Pricing Efficiency Test: Hong Kong Hang Seng Index Option
Also, Morningstar gave a five-star rating to one of 361 Capital's funds; Franklin Templeton added a retirement target fund; Nationwide added an index option to its fixed indexed annuities; and MassMutual added an employee benefits guidance tool.
Top Portfolio Products: Direxion, SSGA & Van Eck Add ETFs
Other similar studies using the Black-Scholes hedging strategy were done by Krausz (1985) on CBOE, Castagna and Matolcsy (1982) on Australian traded options market, Mittnik and Rieken (2000) on German DAX options market, Cavallo and Mammola (2000) on Italian index option market.
Testing pricing efficiency of index options using Black-Scholes model: evidence from Indian index options market
An online dictionary is housed at the site, as well as a tag cloud for another index option. This is a terrific current events tool.
Lesson plans, web cams, and creation options
The authors present current stochastic volatility models, then present a novel model-free term structure for stock prediction, an adaptive correlation Heston model, the algorithm to control risk using options, evaluation criteria and optimization, a mean reversion-based local volatility model, regression-based correlation model for the Heston model, index option strategies using comparison and self-risk management, and a call-put term structure Hang Seng index analysis.
Volatility surface and term structure; high-profit options trading strategies
Gonzalez-Miranda and Burgess [16] predict the implied volatility from the Ibex35 index option using a multilayer perceptron neural network concluding that neural networks ordinary dominates traditional linear models on the basis of out-of-sample dataset.
Uso de una red neuronal artificial dinamica para pronosticar la volatilidad de una serie de tiempo financiera
By doing this, we assume that the constructed implied volatility index from four stock options can be used as a measure for the implied volatility index of the NZX 15 Index option. The validity of this assumption will be assessed in a later section.
The New Zealand implied volatility index
The International Securities Exchange (ISE) recently announced the launch of a new specialized sector index option -- the ISE-CCM Alternative Energy Index.
ISE to Launch New Sector Index for Alternative Energy

Financial browser ?
Full browser ?