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Closing, Last-Traded, and Settlement Prices for Options

Article Quant Q&A · Author: Neeraj
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Summary

The document distinguishes three option price references. The last-traded price records the most recent execution and can remain unchanged when no further trades occur, even as current quotes move. A closing price may reflect the market around the exchange’s designated close, which need not coincide with settlement time. The settlement price is used by the exchange for margining and may be calculated from a time-window average to reduce the influence of a single late trade.

An example contrasts an ETF’s published close with its final recorded transaction and describes how a small price difference near a strike can affect whether an option is considered in the money. The answers show that labels and timing conventions vary by market and instrument; the example’s averaging window is presented illustratively, not as a universal rule. Traders should check the exchange’s specific definitions and procedures before using any of these prices for valuation, exercise, or margin calculations.

Key ideas

  • The last-traded price is the price of the latest actual execution and can become stale.
  • The closing price reflects a market reference at the exchange’s designated close.
  • Settlement prices are used for exchange margining and may follow a separate calculation time.
  • A settlement calculation may average prices over a window to reduce sensitivity to a single trade.
  • Price definitions and timing conventions depend on the exchange and contract.

Tags

OptionsDerivatives pricingMarket microstructure
Full text
# Difference between Closing Price, Last traded price and Settlement Price for option contracts?


# Difference between Closing Price, Last traded price and Settlement Price for option contracts?












What is the difference between Closing price, Last traded price and settlement price ?

I got the difference between Closing Price and Settlement price from previous post : The difference between Close price and Settelment Price for future contracts

but still confused how closing price is different from Last traded price ?

## Answer by Rime (score 3, accepted)

https://quant.stackexchange.com/a/19129

To answer your question consider the following example using actual prices for SPY ETF on 7/31/15:

"hopey.netfonds.no"

By looking at the last 19 trades that occurred at the very last second, you will see a notable price movement on prices. If you go to Google/Yahoo Finance the Closing Price for the ETF is 210.50 (largest trade at the close?) but the very Last trade according to the AMEX exchange was 500 shares at 210.47. The settlement price is the average price (say on the last 15 minutes ) to avoid manipulation since an option would be considered to be ITM by 0.01 above the strike price for a call.

## Answer by oblisk (score 2)

https://quant.stackexchange.com/a/23062

The easiest way to think of this is as follows:

- Settlement Price - Price at which the exchange margins all accounts for those options.

- Closing Price - Mid/Bid/Ask of Active Market at the exchanges last trade time. E.g. for TY Contracts this is at 5pm EST vs. a Settle Time of 3pm EST.

- Last Trade Price - Not all options trade every day. This is the price the last actual execution was at. E.g. SPY 250 Mar 18 2016 Calls Traded at 0.3 on 1/27/16, it is now 2/2/16 there has been no trades since 1/27 thus 0.3 will remain the last traded price, even if the market is 0.1/0.2

Shown in full with attribution under the source's licence. Licence: CC BY-SA 4.0 (Stack Exchange)

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.