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Futures Final Settlement


Futures Final Settlement - Definition


In futures trading, final settlement is the settlement that takes place during maturity of the futures contract after which the futures contract will cease to exist.


Futures Final Settlement - Introduction


As the name suggests, final settlement is the very last settlement that will be done for a futures contract. If it is a physically delivered futures contract, the actual asset will be delivered following the final settlement. It is no longer just settling the profit or loss as in daily settlement. The final settlement takes place upon maturity of a futures contract and all obligations will be fulfilled between the long and the short as stated in the futures contract.

This tutorial shall explore in depth what Final Settlement is in futures trading and how the process is carried out.


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Difference Between Final Settlement and Daily Settlement


The only difference between final and daily settlement of a cash settled futures contract is only in the fact that it will be the final time the profit and loss between the long and short would be settled, thats all. Its just like one last daily settlement before the futures contract goes void.

Final settlement is a lot more complex for physically settled futures and is the time when the actual assets covered by the futures contract are due to exchange owners.

Final settlement happens on a fixed and specific final settlement date for each expiration month.



Final Settlement Date


Final Settlement of futures contracts happen on a Final Settlement Date which may be different from the expiration date of the futures contract itself. Different bourses and different markets may have their own different regulations regarding Final Settlement Date and the most common Final Settlement Date for Single Stock Futures is 3 business days after expiration date. On the third business day following the expiration day, cash is paid for the stocks and the stocks delivered to the account of the long. This is only an example and you must check with your exchange the exact expiration and final settlement date for the futures contracts that you buy.



Futures Final Settlement Price


Final settlement price is the price at which the underlying asset is to be exchanged at or is the final priced used in the determination of profit/loss for cash settled futures contracts. Again, determination of final settlement price is as complex and diversed as the determination of daily settlement prices and each bourse and exchange would have its own policies surrounding this.





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Futures Daily Settlement
Futures Settlement
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Futures Contracts
Single Stock Futures
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