What is the difference between an index option and a share option?

Submitted by Stock Market News on 2 June, 2011 - 17:55

Difference between an index option and a share option
  • The premium and exercise level of an index option is expressed in points, which is converted to dollars through a contract multiplier of $10 per point.
  • Index option can only be exercised on the expiry day, while share options can be exercised at any time. However you can close out your option position any time.
  • Index options expire six quarters ahead, listed in March, June, September and December. Stock options on the other hand expire on the third Thursday of the expiry month. Trading stops at 12 noon on the expiry date.
  • Index options are settled in cash, if you exercise an in the money index option. However, they are not exercised at the expiry, unless you have instructed your broker to set your index option at auto-exercise. The payment is based on the option’s intrinsic value, which depends on the Opening Price Index Calculation (OPIC). The OPIC is derived from the opening price of each stock in your index. The total settlement amount is the difference between the exercise level and the Opening Price Index Calculation, which is then multiplied with the contract multiplier. The OPIC is announced on 10:20am on the day of expiry.

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