Cash-settled options
Cash-settled options pay the difference between a settlement value and the strike in cash instead of delivering the underlying. Broad index options such as SPX and NDX settle this way, which removes delivery, but makes the exact settlement value, taken at the open or at the close depending on the series, the number that decides the payoff.
Senzoukria · Glossary · Updated September 2026
At a glance
- Call payoff
- max(settlement value − strike, 0) × multiplier
- Put payoff
- max(strike − settlement value, 0) × multiplier
- Examples
- SPX and NDX index options
How settlement works
An index cannot be delivered, so index options settle in cash. At expiry, in-the-money contracts pay their intrinsic value measured against a published settlement value, multiplied by the contract multiplier, and no position in the underlying results. For SPX, standard monthly contracts are settled on a special opening quotation calculated from the opening prices of the index components on the expiry morning, published under the symbol SET, while SPXW contracts settle on the closing value of their expiry day.
Worked example
A trader holds one SPX 5,000 call. If the settlement value is 5,042.35, the call pays (5,042.35 − 5,000) × 100 = 4,235 dollars, credited in cash, and the position disappears. A 5,050 call on the same series expires worthless. Had the index traded higher during the previous afternoon, only the settlement value counts for an AM-settled contract: the last trading price of the option is not the payoff.
Cash-settled against physically settled
| Aspect | SPX (cash) | SPY (physical) |
|---|---|---|
| At expiry | Cash difference, no position left | Delivery of 100 ETF shares per contract |
| Exercise style | European | American |
| Weekend or overnight risk after expiry | None from the option | The delivered share position is exposed |
| Early assignment | Not possible | Possible |
Why futures traders care
Cash settlement removes the delivered positions that physically settled options leave behind, but concentrates risk on the settlement print. For AM-settled series the value comes from the component opening prices on expiry morning, and it can differ from both the previous close and the futures price at the same moment. Quarterly E-mini S&P 500 futures also settle to a special opening quotation of the index on their expiry day, so those mornings combine several settlement flows. Senzoukria's curated GEX symbol list consists of ETFs and stocks such as SPY and QQQ, whose options settle physically, and its chart overlay maps ES to SPY and NQ to QQQ.
Related
In the same section
- SKEW Index
- Cash-and-carry trade
- Central limit order book
- Cash settlement
- CFTC and NFA
- Cancel on disconnect
- Charm
- Calmar ratio
Sources
- Cboe — Settlement of standard AM-settled S&P 500 index options (2026-09-25)
- Cboe — S&P 500 index options product specifications (2026-09-25)
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Frequently asked questions
- Do cash-settled options create stock or futures positions?
- No. In-the-money contracts are closed out with a cash payment equal to their intrinsic value against the settlement value. Nothing is delivered and no position remains after settlement.
- Why can an SPX option expire in the money when the index closed below the strike the day before?
- For AM-settled SPX series, the payoff uses the special opening quotation computed from the components' opening prices on expiry morning, not the previous close. A gap between the close and the opening prices can move the settlement value across a strike.