Series 7 practice questionhardOptions — Index Option Settlement
An investor holds 1 OEX (S&P 100) 2100 call. At expiration, the index closes at 2135. What cash settlement does the investor receive?
- A$350
- B$35,000
- C$35
- D$3,500✓ Correct answer
Explanation
Why D — $3,500
The in-the-money amount is 2135 - 2100 = 35 index points. Each index point is worth $100 for standard index options. Cash settlement = 35 x $100 = $3,500. Index options are always settled in cash — no stocks are delivered. The investor receives $3,500 minus the premium originally paid to determine profit.
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