Index option

An exchange-traded derivative financial instrument. The underlying for this type of option is an index, such as a stock index or a specific sector or commodity index. With the option, its buyer acquires the right, but not the obligation, to buy (call) or sell (put) the index within a certain period at a certain price. However, because an index is not an underlying asset that can actually be delivered, index options are settled in cash (call and put option contracts traded on an underlying index, such as the DAX, and not a tangible asset. This gives investors the opportunity to make [or lose] money by anticipating the gains or losses in an industry group or a broader segment of the market). – See index certificate.

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