Settlement Price vs Last Traded Price: Why They Rarely Match
The settlement price and the last traded price almost never match, and beginners constantly misunderstand the difference. The last traded price is just the final tick before the bell. The settlement price is a calculated number the exchange uses for margin, P/L, and official accounting. One is noise. One actually matters.
The Last Traded Price: Just the Final Print
The last traded price is literally the final trade that hit the tape before the session closed. That’s it. It tells you nothing about true value—just what the last buyer and seller agreed on.
- can be a random outlier
- may come from a tiny lot
- can be hit by a spread order, not a real directional trade
- is not used for margin calculations
This is why relying on the last traded price is sloppy as hell. It’s just the last match, not the official value.
The Settlement Price: The Exchange’s Official Value
The settlement price is the number the exchange says the market is worth at the end of the session. It’s used for:
- mark-to-market P/L
- margin requirements
- accounting
- clearinghouse risk models
Unlike the last traded price, settlement is calculated using specific rules.
How Settlement Is Calculated
Each exchange uses its own formula, but settlement generally comes from a volume-weighted average price (VWAP) taken during a narrow window before the close.
Common settlement inputs:
- VWAP from the settlement window
- weighted average bid/ask
- spread market adjustments
- official markers from clearing data
If you want the deeper settlement mechanics, check How Futures Settlement Works.
Why Settlement and Last Trade Diverge
| Reason | Impact |
|---|---|
| Thin liquidity into the close | Last trade can be far from fair value |
| Spread trades hitting the tape | Last price doesn't reflect outright value |
| Large players avoiding the close | Settlement becomes more reliable than tape |
| Settlement window averaging | Smooths out noise from random prints |
Why This Matters to Futures Traders
Your account doesn’t get valued using the last traded price. Your account is valued using the settlement price. That means:
- your P/L resets based on settlement
- your margin is set using settlement
- your next-day risk starts from settlement
Last traded price is trivia. Settlement is the number that actually hits your account.
Common Mistakes Traders Make
- thinking they “closed green” because last trade was higher
- ignoring settlement drift that pushes margin up
- not realizing spreads distort the last-tick prints
- assuming last traded price reflects real demand
This stuff catches beginners off guard constantly.
Final Takeaway: One Is Noise, One Matters
Last traded price = the final random print. Settlement price = the official value the exchange uses. Once you understand the difference, you’ll stop reading the tape like a beginner and start respecting the number that actually changes your account balance.