Skip to main content

What Is the Main Advantage of Cash Settlement for an Index Option?

The main advantage is the simplicity and efficiency of the settlement process. It avoids the complex logistics and high transaction costs of having to physically deliver or receive a basket of potentially hundreds of individual stocks that make up the index.

This makes the contract more accessible and liquid.

How Does the Wash Sale Rule Differ for Stocks versus Section 1256 Contracts?
Can ERC-1155 Be Used to Represent a Basket of Different Cryptocurrency Assets?
How Does the Concept of ‘Carrying Costs’ Affect the Early Exercise Decision for a Call Option?
Can Portfolio Margining Be Applied across Different Asset Classes (E.g. Stocks and Crypto)?