Final answer:
Index options are settled in cash rather than by delivery of the actual stocks that make up the index.
Step-by-step explanation:
The statement is False. Index options are settled in cash rather than by delivery of the actual stocks that make up the index. When an index option is exercised, the option holder either receives or pays the difference between the exercise price and the settlement price of the index in cash.
For example, let's say you hold an index call option that gives you the right to buy the S&P 500 index at a strike price of $3,000. If the index settles at $3,100, you would receive $100 in cash for each option contract you exercise, rather than receiving shares of all the stocks in the index.
This is different from equity options, where the underlying asset is usually the stock itself and delivery of the underlying stock is typically required upon exercise.