An outperformance option in which the payoff is based on the difference between the performances of more than one index. The payoff is affected by the change in the spread between the underlying indexes. Therefore, this option is usually settled in cash. For example, consider a multi-index option that is written on a 4% spread between index (A) and index (B) after a year from the date of initiation.

After a year, if index (A) has advanced 8% while index (B) has edged up 2%, the option will have a positive payoff because the the first index outperformed the second by by six percentage points. However, if the index (A) outperforms by less than four percentage points after a year, the option will expire worthless.