Definition of 'Settlement Price'
The official Settlement Price is often used for determining the payments and receipts for Options and Futures that expire on that day.
The difference between the settlement price and the last traded price often causes confusion for new traders. The Last Traded price is that price at which the last trade was transacted during that session. The settlement price, however, is based on a formula which usually includes the last traded price as one of the inputs to the formula. It is more difficult to manipulate the settlement price which makes it a fairer price at which to settle contracts based on the "ending price" in a session.
The settlement price is also referred to as "the settle."
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