An option contract where the underlying asset is a stock market index rather than an individual stock.
An index option is a derivatives contract whose underlying is a broad market index, such as Nifty 50 or Bank Nifty, rather than a single stock. Index options are typically European-style and cash-settled, since physical delivery of an index isn’t possible. They are widely used for hedging portfolio-level risk and for speculative strategies on overall market direction, and they tend to have deeper liquidity than most individual stock options in the Indian market.
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