Settlement Price
Settlement price is the official price the exchange uses each trading day to mark futures positions to market and value obligations — a daily figure, distinct from the special final settlement price used only on expiry day to settle expiring options and futures.
Quick Answer
Settlement Price is the exchange's daily mark-to-market figure for open futures, recomputed every trading session — not the one-time value used at expiry. On an ordinary Monday, Nifty futures might settle at 25,060 for that day's MTM, while only the special final settlement price actually closes an expiring contract.
Definition of Settlement price
Settlement price is the official daily price the exchange uses to mark futures to market and value obligations — distinct from the special final settlement price used only at expiry.
Key takeaways on Settlement Price
- Settlement price is computed daily and used to mark futures positions to market — an ongoing, everyday figure.
- It is distinct from the final settlement price, the special expiry-day calculation that actually settles an expiring contract.
- Confusing the two is a common mistake; only the final settlement price decides an option's ITM/OTM outcome at expiry.
Settlement Price at a glance
| Frequency | Computed daily, every trading session |
|---|---|
| Used for | Mark-to-market of open futures positions |
| MTM cash flow | Settled the next working day |
| Distinct from | Final settlement price (one-time, expiry-day only) |
| Example | 25,060 daily settlement on Nifty futures (illustrative) |
| Basis | Typically closing session trading activity |
Settlement Price in simple words
Every trading day, the exchange fixes a settlement price for each futures contract — usually based on closing trading activity — and uses it to compute the day's profit or loss for every futures holder (mark-to-market). This happens every single day a futures contract is alive, not just at expiry. On the expiry day itself, a special, more carefully computed version — the final settlement price — takes over and is what actually closes out the contract for good.
Why Settlement Price matters
A daily settlement price lets the exchange mark every open futures position to a fair, official value each day, collecting or paying mark-to-market margins so that losses never accumulate silently across weeks. It is the ongoing engine of futures risk management, running continuously until expiry.
Settlement Price: visual explanation
The daily settlement price marks futures to market each day; on expiry day it is superseded by the final settlement price.
Settlement Price: professional explanation
Daily settlement price and mark-to-market
For futures, the exchange computes a daily settlement price — typically derived from closing session trading activity — at the end of each trading day. Every open futures position is marked to this price, and the resulting gain or loss is settled in cash the next working day, a process called mark-to-market (MTM) that repeats every trading day of the contract's life.
How settlement price differs from final settlement price
The daily settlement price is an everyday, ongoing figure used purely for MTM while a contract is still alive. The final settlement price is a one-time, special calculation used only on the expiry day itself — for Indian index derivatives, the weighted average of the underlying over the last 30 minutes of trading — and it is this final figure, not any single day's settlement price, that actually closes out and settles the expiring contract.
Why the terminology gets confused
Because both concepts use the word 'settlement price,' traders sometimes assume the closing price used for a normal day's MTM is the same mechanism used to settle an expiring contract. It is not: the final settlement price uses a deliberately smoothed last-30-minutes average precisely so that a single, potentially manipulable closing print cannot decide the fate of an entire expiry.
Settlement Price in practice (Nifty / Bank Nifty)
Illustrative — Nifty spot 25,000, lot size 65
On a normal Monday, Nifty futures close with a daily settlement price of 25,060, and every futures holder's account is marked to that price for the day's MTM. On the following Tuesday — expiry day — the contract is instead settled against the final settlement price, the weighted average of Nifty over 3:00–3:30 PM, which might come in at 25,082, a different (and specially computed) number from any single closing print.
For a Reliance stock future, the same distinction applies: its daily settlement price drives ordinary MTM margin calls throughout the month, while only the special final settlement price on its expiry day determines the physical delivery obligation that closes the contract.
Advantages of Settlement Price
- Daily settlement price enables continuous, transparent mark-to-market, preventing large losses from silently building up unmonitored.
- Keeps the futures market's margining system fair and current, day by day.
- Distinguishing it from the final settlement price protects expiry outcomes from being decided by a single, potentially thin closing print.
Limitations of Settlement Price
- The terminology overlap between 'settlement price' (daily) and 'final settlement price' (expiry) is a frequent source of confusion.
- Daily MTM settlement can require ongoing margin funding throughout a futures position's life, well before expiry.
- A daily settlement price on a normal day does not determine an option's exercise outcome — only the final settlement price does that.
Why Settlement Price matters in practice
- Track your daily MTM obligations on futures positions throughout the contract's life, not just at expiry.
- Never assume a normal day's settlement price is what will decide your expiring option's fate — that is the final settlement price alone.
- Understand both concepts clearly before trading futures, since daily settlement price funding needs can be significant over a long hold.
Common mistakes with Settlement Price
- Confusing the daily settlement price with the final settlement price used at expiry — they serve different purposes.
- Ignoring ongoing MTM funding needs on a futures position because 'expiry is far away.'
- Assuming the exchange's daily closing print alone determines expiry settlement — the final settlement price uses a specific averaging window instead.
- Not checking whether a quoted 'settlement price' in a broker statement is the daily MTM figure or the final expiry-day figure.
How professionals treat Settlement Price
Professionals distinguish these two settlement-price concepts precisely: they track daily settlement price for ongoing MTM funding on futures, while reserving 'final settlement price' specifically for the expiry-day computation that actually closes out a contract, never conflating the two in their planning.
Settlement Price: frequently asked questions
Is settlement price the same as final settlement price?
No. Settlement price is a daily, ongoing figure for mark-to-market; the final settlement price is a one-time, special expiry-day calculation that actually settles an expiring contract.
How often is the settlement price calculated?
The daily settlement price is calculated at the end of every trading day for futures mark-to-market. The final settlement price is calculated only once, on the expiry day itself.
What is settlement price used for?
Primarily for daily mark-to-market of futures positions — computing each day's gain or loss to be settled in cash the next working day.
How is the daily settlement price computed?
Typically from closing session trading activity in the futures contract on that day, as defined by the exchange's methodology.
Does settlement price affect options?
The daily settlement price mainly affects futures MTM. For options, only the final settlement price at expiry determines whether they are in-the-money and what they pay out.
Why do exchanges use a daily settlement price instead of just waiting for expiry?
To manage risk continuously — daily mark-to-market prevents losses from accumulating unmonitored over a contract's life and keeps margining current.
What happens to settlement price on expiry day?
It is superseded for closing purposes by the final settlement price, a specially computed weighted-average figure used to settle the expiring contract.
Is settlement price the same as closing price?
They are often closely related or identical for the daily MTM purpose, but the exchange's precise settlement-price methodology can differ from a simple last-traded closing price.
Voice search questions about Settlement Price
Natural-language questions people ask about Settlement Price.
What does settlement price mean in trading?
It's the official price the exchange uses, usually daily, to mark futures positions and calculate the day's profit or loss.
Is settlement price the same every day?
No, it is recalculated at the end of each trading day for futures mark-to-market, and it is different again — using a special method — on expiry day.
What decides if my option is in the money?
Not the daily settlement price, but the final settlement price computed specifically on expiry day from the underlying's last 30 minutes of trading.
Sources & references for Settlement Price
Published 10 July 2026. Educational content only — not investment advice. Exchange rules change; verify current conventions on NSE/BSE.