settlementprice

Settlement price is an official price used by futures and options markets to determine the value of positions at the end of each trading day and to settle contracts at expiration. It serves as the reference for marking positions to market, calculating daily gains and losses, and triggering margin changes.

The exact method for calculating the settlement price varies by exchange and contract. Common approaches include deriving it from the official closing price, using a volume-weighted average price during a specified settlement window, or combining trade and quote data from a defined time period near the close. Some contracts use the last trade price during the settlement period, while others apply more complex rules to reduce the influence of outliers. Because methods differ, the settlement price for one contract may not be identical across markets or products.

Settlement price is used for several key purposes. It determines daily mark-to-market settlements, thereby affecting margin calls and account balances. For expiring contracts, the settlement price establishes the final cash value or the basis for physical delivery in cash-settled or physically settled contracts. In index or cross-market futures, the settlement price often serves as the final reference for determining payoff amounts.

Due to variations in calculation rules, traders and risk managers should consult the specific contract specifications for the exchange and product in question to understand how the settlement price is determined and applied.