Index options are settled:
A) by delivering a portfolio mimicking the index.
B) by delivering an index mutual fund.
C) in cash.
D) by delivering an endowment funds.
E) by delivering Treasury bills.

Question

Quizplus · Accepted Answer

Index options are settled in cash, meaning that the amount of the payoff is simply transferred from the option seller to the option buyer. This is the most efficient and practical settlement method for index options.

Index Options Are Settled