when you trade an index option you are actually buying the right to buy or sell a futures contract on the underlying index since these futures are themselves derivatives an index option can be considered a second derivative of the underlying index 
the bottom lineindex options give traders the ability to hedge their portfolios with exposure to a broad cross section of the market as with other options it is important to understand how expiration dates and strike prices affect their value unlike some other options index options are usually cash settled and cannot be redeemed before their expiration date 