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Settlement Price
The official price used to determine final profit or loss on a futures contract at expiry, which may differ slightly from the last traded price.
A settlement price is the official price used to calculate final profit or loss on a futures contract when it expires, generally determined by a specific, published methodology (such as averaging prices over a defined window) rather than simply taking whatever the single last traded price happened to be.
Using a defined methodology rather than the literal last trade is specifically intended to make the settlement price more resistant to manipulation or an unrepresentative final trade right at the moment of expiry.
Examples
- A futures contract's settlement price is generally calculated using a defined methodology, not simply whatever its single last trade happened to be.
- A defined settlement methodology specifically reduces the risk of a single, unrepresentative trade right at expiry distorting a contract's final settlement.