Settlement price
A settlement price is the official price used to work out what a futures or options contract pays when it expires.
🌍 In the real world
Many index options and futures settle in cash rather than by delivering shares: the holder receives the difference between the settlement price and the strike. Cash settlement of stock index contracts began with US index futures in 1982.
Exchanges set the settlement price by a fixed method, such as opening prices on expiry day or an average over a period, so one late trade can't swing every contract's payout.
Example
A call with a $50 strike settles at $53: a contract on 100 shares pays 100 × $3 = $300.
🎮 In Journey Shares
Game options settle in play money against the listing's 24-hour average price at expiry, so a single trade just before expiry can't decide the payout. →
🧭 How to use it
Because game options settle on a 24-hour average, the whole last day matters, not just the last minute. If your option is near its strike on Thursday, Friday's average decides it.
🎮 Learn Settlement price the fun way
Try it in a live 3D city with play money: trade shares in real public figures, get margin-called, pay your taxes and rob a bot or two. Free, and nothing real is at stake.
❓ Common questions
What's the difference between cash settlement and physical delivery?
Physical delivery means the shares actually change hands; cash settlement pays the difference in money.
Why do some options settle on the opening price?
Many US index options use a special opening price on expiry morning, a practice known as AM settlement.
📜 Where it came from
🔗 Related terms
- Expiration date: An option's expiration date is the last day it can be used.
- Call option: A call option is a contract that gives its buyer the right, but not the obligation, to buy a stock at a set price (the strike) before or at a set date.
- Put option: A put option is a contract that gives its buyer the right to sell a stock at a set price (the strike) before or at a set date.
- Strike price: The strike price is the fixed price at which an option lets its holder buy (for a call) or sell (for a put) the underlying stock.
Categories: Options
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