A.M. vs P.M. settlement for index options

Summary

A.M. and P.M. settlement describe whether an index option’s final settlement value is based on opening or closing prices. In practice, that changes when trading stops and how the final settlement level is determined.

Definition

A.M. versus P.M. settlement refers to the timing and calculation method used to determine the final settlement value for an index option. In this article, P.M.-settled contracts use the official closing index level, while A.M.-settled contracts use a special opening quotation derived from opening prints of the constituent securities. This difference matters because it affects both the last trading day and the settlement process: some A.M.-settled SPX series stop trading on the business day before the settlement calculation, while expiring P.M.-settled SPX Weeklys and end-of-month series cease trading on expiry day. For anyone trading index options across securities, checking whether a series is A.M. or P.M. settled is essential to avoid expiry surprises.

Sources

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