InvestorQ : Are index options the same as stock options?
Anamika Sodhani made post

Are index options the same as stock options?

Answer
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Anamika Sodhani answered.
2 years ago


While a stock option is a right to buy a stock, an index option is the right to buy the index like the Nifty or the Bank Nifty or the Sensex. Such indices are broad representations of the market and are a better way to take positions in the market as a whole or in a set of stocks in the index. In the case of index options, the Nifty or the Bank Nifty is the underlying asset and the value of the option is linked to the price movement of the index.

Index Options are options where the underlying asset is a Stock Index e.g. Options on "S&P BSE SENSEX". Index Options were first introduced by Chicago Board of Options Exchange (CBOE) in 1983 on its Index "S&P 100". As opposed to options on Individual stocks, index options give an investor the right to buy or sell the value of an index which represents group of stocks.