Trading at settlement refers to a rule in futures trading that allows parties involved in a trade to agree that the trade price will be based on the settlement price for that day. This can include the settlement price adjusted by a specific differential, either added or subtracted. This practice is commonly used to facilitate trades at a price that reflects the market's closing value for that trading day.
This term is primarily used in the context of futures trading and is relevant in financial markets. It falls under the broader category of trading regulations and practices. Users may encounter this term when engaging in futures contracts, where understanding settlement prices is crucial for effective trading strategies. Legal forms related to futures trading may help users navigate agreements involving trading at settlement.
Here are a couple of examples of abatement:
Example 1: A trader agrees to sell a futures contract at the day's settlement price of $100, which reflects the market value at the end of the trading day.
Example 2: A trader may negotiate a price of the settlement price plus a differential of $2, resulting in a trade price of $102. (hypothetical example)
| Term | Definition | Key Differences |
|---|---|---|
| Settlement Price | The final price at which a futures contract is settled at the end of the trading day. | Trading at settlement specifically involves agreeing to trade at this price, while the settlement price itself is a market value. |
| Market Price | The current price at which an asset is being bought or sold in the market. | Market price can fluctuate throughout the trading day, whereas trading at settlement refers to a fixed price based on the day's end. |
If you are considering trading at settlement, ensure you understand the settlement price and any differentials involved. It may be beneficial to consult with a financial advisor or a legal professional experienced in futures trading. Additionally, users can explore US Legal Forms for ready-to-use templates related to futures trading agreements.
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The settlement price is the final price at which a futures contract is settled at the end of the trading day.