INDEX OPTION is cash settled right ? let say, I own RUT call with a strike price of 640 expiring in July. the settlement price is 642. The brokerage will simply credit my account with 200 bucks right ? or the brokerage will close my position for me right before the last minute ? thanks
My recommendation for any specific contract would be to find the website for the exchange the option trades on. All the majors will have stuff you can download to get the exact details for a particular contracts settlement procedures. Once you know how the contract works, check with your broker to make sure they dont do anything funny. For example, the exchange may set a margin requirement and your broker may require more. Or cash from an option sale may not be immediately available to you. Some brokers do strange things. -Tony
A true index option would settle in cash. A futures index option, like ER2 on the RUT, would settle into a Sept futures contract.