Stock index options are produced on the basis of stock index futures contracts. The option buyer pays the option fee to the option seller to obtain the option to buy or sell the stock index contract at a certain price level, that is, the stock index level, at or before a certain time in the future. The first common stock index option contract appeared in Chicago Board Options Exchange1March, 983. The subject matter of this option is the S&P 100 stock index. Subsequently, American Stock Exchange and new york Stock Exchange quickly launched the index option trading. The index option takes the common stock price index as the target, and its value depends on the value and change of the stock price index as the target. Stock index options must be paid in cash. The amount of cash closed is equal to the product of the difference between the present value of the index and the exercise price and the option multiplier.
Stock index option gives the holder the right to buy or sell a specific stock index at a specific price on or before a specific date (European) or a specific date (American), but this is not the responsibility. The buyer of stock index option needs to pay a premium for this right, while the seller of stock index option can charge a premium, but when the option buyer exercises his right, he is responsible for fulfilling the obligation to buy or sell a specific stock index.
The earliest stock index option trading was launched by CBOE in March 1983+0 1, which is S&; P 100 index option trading, and then the American Stock Exchange (AMEX) also introduced the major market index (MMI) option. Although the trading of stock index options came into being after the trading of stock index futures, after years of development, the trading volume of stock index options worldwide has now surpassed that of stock index futures and become another star in the stock market derivatives market.