Why was the settlement price 0 for the option position, although the Last Traded Price (LTP) is not 0?
Why was the settlement price 0 for the option position, although the Last Traded Price (LTP) is not 0? Find a clear answer in this FAQ by 021 Trade.
Understanding Settlement Price vs. LTP in Options
The settlement price is calculated as the weighted average of all trades executed during the last 30 minutes of trading in the underlying instrument in the cash market.
Key Points to Note:-
- The Last Traded Price (LTP) of an option contract cannot be zero, as it reflects the most recent traded value in the market.
- However, in the case of Out-of-The-Money (OTM) options, the settlement price is considered zero at expiry, regardless of the LTP.
- This means that even if an option contract is trading at โน0.50 or โน0.25, its final settlement value will be โน0 if it expires OTM.
Important Insight
- LTP reflects real-time market activity
- Settlement Price determines the final payoff at expiry
