Investors who want to take a position in index options will purchase calls and puts just like investors in stock options. However, an index is not a security and cannot be physically delivered if the option is exercised. An investor cannot call the index away from someone who is short a call and cannot put an index to an investor who is short a put.
As a result, the exercise of index options will be settled in cash. An option holder who elects to exercise the option will have their account credited the in the money amount, in cash.
The amount that will be credited to their account will be the in the money amount at the close of the market on the day of exercise. If at expiration, the index is at Dictionary Term Of The Day. A conflict of interest inherent in any relationship where one party is expected to Broker Reviews Find the best broker for your trading or investing needs See Reviews.
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Become a day trader. Chapter 1 Chapter 2 Chapter 3 Chapter 4 Chapter 5. The Options Market Place 4. Option Taxation And Margin Requirements 5. An investor establishes the following position: Exercising early can benefit options traders, but only when trading American-style options.
There are times when an investor shouldn't exercise an option. Find out when to hold and when to fold. Index options are less volatile and more liquid than regular options.
Understand how to trade index options with this simple introduction. Learn the top three risks and how they can affect you on either side of an options trade. Learn how to buy calls and then sell or exercise them to earn a profit. Here's help in making the decision.
Choosing either ETF options or index options can make the difference between big profits or a big bust. These two options have many similar characteristics, but it's the differences that are important.
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The Options Market Place. Option Taxation And Margin Requirements.More...