How do broad-based indexes like the SPX, MID and RUT settle and expire?
The MID, SPX and RUT indexes are classified as broad-based, cash settled indexes, and option contracts on these indexes are classified as European style and AM settled. The RUT is the symbol for the Russell 2000 small-cap index, the MID is the symbol for the S&P400 mid-cap index, and the SPX is the symbol for the S&P 500 index. Broad-based means that the index comprises 100s or even thousands of stocks. The RUT index comprises 2000 small-cap stocks, the MID index comprises 400 mid-cap stocks, and the SPX index comprises 500 large-cap stocks. Cash-settled means that when an option contract on the index settles in-the-money (ITM), cash will be withdrawn from your account. European-style means that option contracts on these indexes cease to trade on the 3rd Thursday of each month, and they can only be exercised on the last business day prior to expiration, which is the 3rd Friday of each month. AM settled means that the index’s final price will be calculated on the 3rd Friday of each mont
