Index option

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Index option

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.

References in periodicals archive ?
Morgan Global Credit Volatility Premium Index UCITS ETF tracks the difference between realised and implied volatility in the markets for credit default swap (CDS) index options. The index reflects the performance of put options on European and North American High Yield CDS indices and hedges the risk of credit spreads daily through delta hedging.
Operating revenues, excluding investment and index options gains and losses, increased to USD171.3m in the quarter ended March 31, 2019 from USD152.8m in the comparable quarter of 2018.
The CBOE Volatility Index, which measures the stock market's expectation of volatility implied by S&P 500 index options, rose 26 per cent on Tuesday to 20.74, the pick-up having started in October.
Prior to joining Darwin, Mikaitis worked in financial markets as a sales trader, brokering and analyzing index options and futures.
With a variety of industry-leading index options, as well as an innovative optional rider providing guaranteed retirement income, it has become a primary choice for many risk-averse clients seeking more accumulation potential in today's low interest rate environment.
Index option Tips is especially designed for those traders who trade in index options.
Finally, we combine the proposed strategies with index options. The exploitation of this phenomenon through options is still novel approach since it has not been deeply researched in academic papers, at least from a perspective of generating strategies.
Nationwide Life and Annuity Insurance Company, an affiliate of Columbus, Ohio-based Nationwide Mutual Insurance Company, has added two index options to its Nationwide New Heights indexed annuity contracts.
The purpose of this study is to examine the presence of volatility smirk anomaly in index options and its predictability for future returns.
Under the Regulations Governing the Index Options; only the Institutions, TREC Holding Members of PSX and Non-Broker Clearing Member of the NCCPL that are meeting the conditions set in the eligibility criteria are eligible to become Option Writers for which the main idea is to ensure that the Writer of Option Contracts has sound financial and technical standing to qualify for this mode of trade.
And Ait-Sahalia and Kimmel [17] gathered price data of S&P 500 Index Options market and used AML function to conduct parameter estimation of several random volatility models and obtained good estimation results.
(NASDAQ: CBOE) has closed its acquisition of the market data services and trading analytics platforms of equity and index options technology provider Livevol, Inc., the company said.