What is Index Option
Definition: All the options that have an index as underlying are known as Index Options. The two most basic and popular index options are Call Option and Put Option. Further, they may be American Options or European Options.
A Call Option gives the buyer a right to buy a specified quantity of an underlying index at a pre-decided price. For this privilege, the buyer of the Call Option pays an upfront premium to the seller or writer. A Put Option gives the buyer the right to sell a specified quantity of an underlying index at a pre-decided price; for this privilege the buyer of the Put Option pays an upfront premium to the Put Option seller or writer.
An American Option may be exercised anytime before the expiry of the contract whereas a European Option can be exercised only on the day of expiry.
Description: Consider an index, say the Nifty50 index of NSE. Now all Call Options and Put Options being traded on the Nifty50 are together called as Nifty50 Index Options or just Nifty50 Options.
On the link below you can find the most actively traded Nifty50 options on the NSE:
http://www.nseindia.com/live_market/dynaContent/live_watch/derivative_stock_watch.htm
The next column ¡°Turnover (lacs)¡± represents the notional turnover of the options, i.e. Sum of (strike price of each contract traded today X No of underlying asset in each contract). The column ¡°Premium Turnover¡± is the sum of premium paid on all the contracts traded through the day. The last column ¡°Underlying Value¡±, as the name suggests, displays the value of the underlying asset, in this case, spot Nifty50 index.
A Call Option gives the buyer a right to buy a specified quantity of an underlying index at a pre-decided price. For this privilege, the buyer of the Call Option pays an upfront premium to the seller or writer. A Put Option gives the buyer the right to sell a specified quantity of an underlying index at a pre-decided price; for this privilege the buyer of the Put Option pays an upfront premium to the Put Option seller or writer.
An American Option may be exercised anytime before the expiry of the contract whereas a European Option can be exercised only on the day of expiry.
ADVERTISEMENT
Description: Consider an index, say the Nifty50 index of NSE. Now all Call Options and Put Options being traded on the Nifty50 are together called as Nifty50 Index Options or just Nifty50 Options.
On the link below you can find the most actively traded Nifty50 options on the NSE:
http://www.nseindia.com/live_market/dynaContent/live_watch/derivative_stock_watch.htm
ADVERTISEMENT
Refer to the table in the above link. The 1st column on the page states that the option type is ¡°Index Options¡± with ¡°Nifty50¡± as the underlying having 29 October 2015 as expiry date. The next column displays the ¡°Strike Price¡± of the options. The next four columns display the Open, High, Low, Previous Close and Last Price for the trading day. After that ¡°Volume Contracts¡± specify the number of individual contracts traded on that day.The next column ¡°Turnover (lacs)¡± represents the notional turnover of the options, i.e. Sum of (strike price of each contract traded today X No of underlying asset in each contract). The column ¡°Premium Turnover¡± is the sum of premium paid on all the contracts traded through the day. The last column ¡°Underlying Value¡±, as the name suggests, displays the value of the underlying asset, in this case, spot Nifty50 index.