Series 7 practice questionmediumOptions — Index Options
Broad-based index options such as the S&P 500 Index (SPX) use which exercise style?
- AAmerican style — can be exercised any time before expiration
- BEuropean style — can be exercised only at expiration✓ Correct answer
- CBermuda style — can be exercised on specific dates
- DAsian style — based on the average price over time
Explanation
Why B — European style — can be exercised only at expiration
Broad-based index options like the SPX use European-style exercise, meaning they can only be exercised on the expiration date, not before. This contrasts with equity options and narrow-based index options, which are typically American-style and can be exercised at any time prior to expiration.
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