Benefits of Index

Cash Settlement's Pole Position

Most index options are settled in cash at expiration. That means your trade's profits and losses are settled as a debit or credit directly into your trading account. You don't have to worry about receiving or delivering securities upon exercise or assignment.

Make Cash Settlement
Work for you

Index Option Buyer

  1. Buys a long 4500 SPX Call Option

    At expiration:

  2. SPX settles at 4540
  3. Index option buyer receives a credit of $4,000 in trading account

(4540-4500) X 100 = $4,000

ETF Option Buyer

  1. Buys a long call with a strike price of $100

    At expiration:

  2. ETF closes at $100.10
  3. Call option is exercised
  4. 100 shares of the underlying at strike price ($100) will be credited to the ETF option buyer's account.
  5. ETF option buyer should have $10,000 in account to buy the underlying shares and now has a position in 100 shares of ETF.

In, Out, AM or PM

Generally, an in-the-money (ITM) option is at risk of assignment or exercise depending on whether you're long or short. An out-of-the-money (OTM) option would expire worthless.

Suppose you own index puts. When your long index put expires and it's ITM (the put strike is higher than the index settlement price), the difference between the option's strike and the settlement price of the index will be credited to your account.

To avoid unpleasant surprises such as aggressive Federal Reserve policies, geopolitical tensions, or even a U.S. bank downgrade, it's also helpful to know if an option is AM- or PM-settled.

When an option is AM-settled, the option's value is determined by the opening price on the expiration date. The last trade would occur on Thursday night, but the settlement value won't be determined until Friday's open, leaving the possibility of some overnight risk. A PM-settled option, on the other hand, trades right up to the close on the expiration date, so the closing price is the settled value.

Lapping The Competition:
Benefits Of Index Options

Your first thought might be, "But can't you do that with stock or exchange-traded fund (ETF) options?" You can, but index options come with unique benefits that differ from equity and ETF options and that are worth exploring.

Why Trade Index Options?

Crossing the Finish Line:

The Checkered Flag

Download our free guide to learn more about the potential benefits of index options and why you may want to consider them as part of your trading strategy.

SPX Product Suite Comparison

Cboe Index Options ETF Options
NanosSM Mini-SPX (XSP®) SPX ® Versus SPDR ETF (SPY)
1/100th of XSP 1/10th of SPX 1 Contract Size 1/10th of SPX
$1 $100 $100 Contract Multiplier $100
$450 $45,000 $450,000 Approx. Notional Size
(if S&P 500 is $4,500)
Trading account credited or debited in cash Settlement Type Delivery of underlying shares
European style, exercised at expiration, no risk of early exercise or assignment
Exercise Style American style, can be exercised or assigned prior to expiration
Capital gains may benefit from 60% / 40% tax treatment* Tax Treatment Standard short- and long-term tax rules
Standard market trading hours Global trading hours available** Extended Trading Hours Standard market trading hours
Settlement and exercise style eliminate potential economic and tax risk for writers Certainty of Settlement After market contract assignment may result in unplanned residual positions

Cboe Index Options Quick Links

*Under section 1256 of the IRS tax code, profit and loss on transactions in certain exchange-traded options, including SPX options, are entitled to be taxed at a rate equal to 60% long-term and 40% short-term capital gain or loss, provided that the investor involved and the strategy employed satisfy the criteria of the tax code. Investors should consult with their tax advisors to determine how the profit and loss on any particular option strategy will be taxed. Tax laws and regulations change from time to time and may be subject to varying interpretations.

**Global Trading Hours (GTH). The trading hours for options on the SPX, SPXW (SPX Weeklys and SPX End-of-Month), and XSP (Mini-SPX) begin at 8:15 p.m. Eastern time and end at 9:15 a.m. Eastern time. Please visit the Hours & Holidays page for more details. Options involve risks and are not suitable for all investors. Before trading options, you should discuss with your broker whether trading options is right for you and review the Characteristics and Risks of Standardized Options (or Options Disclosure Document) regarding risks associated with trading options. There are important risks associated with transacting in any of the Cboe Company products or any of the digital assets discussed here. Before engaging in any transactions in those products or digital assets, it is important for market participants to carefully review the disclosures and disclaimers detailed at These products and digital assets are complex and are suitable only for sophisticated market participants. These products involve the risk of loss, which can be substantial and, depending on the type of product, can exceed the amount of money deposited in establishing the position. Market participants should put at risk only funds that they can afford to lose without affecting their lifestyle.