How are US cash-settled options handled at expiration?
AM-Expiration cash-settled options for indices such as SPX, RUT, VIX, etc. have a unique method of settlement. As a result, the last day to trade or close out of AM-expiring options is the day before expiration, which puts these options at the mercy of something called overnight risk.
However, some cash-settled index options expire based on the PM close, namely Weekly/Quarterly/EOM options. That means, rather than being at the mercy of overnight risk, the settlement is based on the market close (Last Price). When dealing with a PM-expiration option, you may refer to the explanation below, but instead, use the market close price as the settlement amount.
Unlike trading in equity/ETF options, trading cash-settled indexes will never result in the delivery of stock, as cash-settled indexes (as the name suggests) settle in cash. To view a table of expiration and settlement of cash-settled indexes then click here.