How Are Index Options And ETFs Traded?

Options on stock indexes and ETFs are traded fairly the same. The difference being that ETF’s values change throughout the day whereas the value on stock index options change at the end of each trading day to match the index they were based off of. Therefore, profit/loss on an index option is based on the market’s closing price for the day, not on any price during the market’s open hours. If the market closes above the intra-day exercise price, then the option will accrue an additional loss, and if the market closes below the intra-day exercise price, the option will accrue an additional gain. For this reason, index options are typically closed out after the market has closed since they show the true or real profit/loss.