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 going to answer the question – “What happens when an index option is exercised?” Today’s question really still revolves around this topic of exercise and assignment, but it’s more targeted towards index option contracts. And so, today, I’ll use two as my examples. The first would be SPY which is an ETF index option contract based on the S&P and then we have SPX which is the bigger, more pricier index option contract of a more true form and is cash settled. In both of these cases, when you go through any exercise process, you would have to notify your broker of the deliberate intent that you have as the option contract owner to exercise your contract and take delivery of the underlying. But the difference is between these two contracts is that one is actually cash settled and European-style settlement and the other is settled to the underlying and is American-style settlement. The younger cousin or the