Settlement Price

AAA

DEFINITION of 'Settlement Price'

In derivatives markets, the price used for determining profit or loss for the day, as well as margin requirements. The settlement price is the average price at which a contract trades, calculated at both the open and close of each trading day. Additionally, it is important because it determines whether a trader may be required to post additional margins. It is generally set by defined procedures that differ slightly among each exchange and the instrument traded.

INVESTOPEDIA EXPLAINS 'Settlement Price'

Typically, the settlement price is set by determining the weighted average price over a certain period of trading, typically shortly before the close of the market. For example, on the Chicago Mercantile Exchange, the settlement prices of certain equity futures are determined by a volume weighted average of pit trading activity in the 30 seconds between 3:14:30 p.m and 3:15:00 p.m. CDT.

RELATED TERMS
  1. Cash Contract

    A financial arrangement that requires delivery of a particular ...
  2. Settlement Date

    1. The date by which an executed security trade must be settled. ...
  3. Rolling Settlement

    The process of settling security trades on successive dates so ...
  4. Contract For Differences - CFD

    An arrangement made in a futures contract whereby differences ...
  5. Futures Contract

    A contractual agreement, generally made on the trading floor ...
  6. Margin

    1. Borrowed money that is used to purchase securities. This practice ...
Related Articles
  1. Reducing Risk With Options
    Options & Futures

    Reducing Risk With Options

  2. Price Volatility Vs. Leverage
    Options & Futures

    Price Volatility Vs. Leverage

  3. The History Of Options Contracts
    Options & Futures

    The History Of Options Contracts

  4. Margin Trading
    Options & Futures

    Margin Trading

Hot Definitions
  1. Financing Entity

    The party in a financing arrangement that provides money, property, or another asset to an intermediate entity or financed ...
  2. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  3. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  4. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  5. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
  6. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
Trading Center