The "daily Call" From Option Alpha: Options Trading | Stock Options | Stock Trading | Trading Online

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we’re answering the question, “Can index options like SPX be exercised?” The short answer to this is no. Index options like SPX, NDX, RUT, etcetera are what are often referred to as European-style settlement or cash-style settlement. Their settlement happens at the end, literally the last day of their expiration cycle and they settle to cash because you can’t actually buy shares of SPX, you can’t buy shares of RUT or NDX, some of these European-style settlement options, but what ultimately ends up happening is that the last day, they just settle to the cash value of whatever the underlying contract was. If there was a value left in there or a profit for an option seller or a buyer, it would settle to that cash value and now, the cash is in your account or if you’re on the losing end, the cash gets taken from your account at the end of settlement. You can’t actually exercise these options in the traditional sense