Question

Upon expiration, all in-the-money S&P 100 index call option are settles by the delivery of which of the following?

A. cash
B. S&P 100 index stocks
C. S&P exchange-traded fund (ETF)
D. the same number of S&P 100 index put options

Answer 1

In-the-money S&P 100 index call options are settled with cash, which represents the difference between the index's closing price and the option's strike price.

Step-by-step explanation:

Upon expiration, all in-the-money S&P 100 index call options are settled by the delivery of cash. Unlike options on individual stocks, index options are cash-settled because the indices, such as the S&P 100, are not physically deliverable. When an index call option expires in the money, the option holder receives the cash value equivalent to the difference between the closing price of the index and the strike price of the option, multiplied by the option's contract multiplier.