Equity vs. Index Options

What this video covers

• What physical delivery means for equity options: 100 shares change hands when exercised, and why Riley's wheelbarrow is the right mental image
• What cash settlement means for index options: the $100 multiplier, the strike-to-index math, and why no wheelbarrow is possible
• Why index options must be cash settled: an index is a mathematical calculation, not a security you can own or deliver
• The difference between American style (exercisable any time before expiration, typical for equity options) and European style (exercisable only at expiration, typical for index options)
• Why European style has nothing to do with geography or foreign markets, and how exam answer choices exploit this confusion
• When to hedge with equity options (single stock risk) versus index options (diversified portfolio against broad market decline)
• The standard contract size distinction: 100 shares for equity options versus $100 cash multiplier for index options