Settlement Price

A settlement price is the official price assigned to a security, futures contract, or option at the close of a trading session, used to value positions and calculate gains or losses for the day. It is not necessarily the same as the very last trade that took place before the market closed; instead, it is often a calculated figure meant to represent a fair closing value, sometimes based on an average of trades in the final minutes of the session, or set by an exchange or clearing organization using a defined formula.

For stocks, the "settlement price" is usually just the official closing price set by the exchange. For futures and many options, an exchange or clearing house (such as a futures exchange's clearing arm, or in the case of listed equity options, a clearing organization) publishes a settlement price after the close, using rules published in advance. Brokers then use this price to mark every open position in an account to that value, a process called mark-to-market, which determines whether an account gained or lost money that day.

The nuance that trips people up is that the settlement price can differ from the last traded price you saw on your screen right before the close. In fast-moving or thinly traded markets, the last trade might be at one price while the official settlement calculation lands somewhere slightly different. That gap matters because margin calls, daily profit-and-loss figures, and even whether a position gets flagged for additional collateral are based on the settlement price, not on whatever price happened to print last.

For day traders, settlement price mostly matters if you hold anything overnight, since intraday round-trip trades are closed out before any settlement calculation applies to them. If you carry a futures or options position past the close, the settlement price is what determines your unrealized gain or loss for margin purposes going into the next session.