AM vs PM Settled Index Options: Wetin E Mean

AM settled and PM settled index options differ for one thing: na which price the contract go use cash out against. AM settled contract, like the classic third Friday S&P 500 option, settles against special opening quotation wey dem assemble from Friday morning opening prints. Its final trade happen Thursday afternoon. PM settled contract, like SPXW weekly or option on SPY exchange traded fund, settles against the 4:00 pm ET closing price and dey trade until the bell.

The difference fit sound like admin matter. But e decide how many hours holder go spend locked inside position wey dem no fit trade again. E fit also give two otherwise identical contracts different payouts on the same day. Below: how each convention work, then how big that difference be across every monthly expiration from January 2024 through July 2026.

Wetin AM settled mean?

AM settlement value contract from the opening, but this opening na construction, no be price wey anybody trade. On expiration morning, exchange take the first regular session trade price of every stock inside the index, whenever each one prints, then combine those prices into one figure: the special opening quotation, wey dem publish for S&P 500 under ticker SET. Every AM settled contract on that index cashes out against that one number, and nothing else.

Four mechanics follow from this definition:

• The last trading session end Thursday. AM settled third Friday contract make its final trade the afternoon before expiration. Once Thursday bell ring, holder no fit close, roll or adjust the position again.
• Settlement na cash. Index options pay the dollar difference, and no shares change hands. Exercise style na European, meaning exercise fit happen only at expiration (American vs European options explain wetin this change for holder).
• The quotation no be snapshot. Component stocks open at different moments, and each one contribute its own first print whenever that print land (the opening auction explain how stock first price for the day dey set).
• The figure publish late. Dem disseminate am after the last component don open, and this fit happen several minutes inside the session.

Wetin PM settled mean?

PM settlement use the underlying closing price on expiration day. Dem strike am at 4:00 pm ET and set am through the closing auction, wey be the biggest single print for most trading days (the closing auction show how that price dey form). The contract dey trade until the bell. Holder wey want comot at 3:55 pm fit sell inside live market instead of waiting overnight for number wey dem still need assemble.

PM settlement cover most things wey retail trader dey touch: SPXW weekly and end of month index contracts, plus listed ETF options like SPY, QQQ and IWM. ETF options get another difference. Dem be American style and settle in shares, so assignment deliver the fund instead of cash. When options expire map the weekly, monthly and quarterly cycles.

How far market fit move between last trade and settlement?

For AM settled holder, the last decision point na Thursday close. Settlement number start form seventeen and a half hours later. The panel below measure that window on SPY, the S&P 500 tracker, with one row for each monthly expiration: overnight move from Thursday close to Friday opening print, beside move from that opening print to Friday close.

WITH sessions AS (
    SELECT toDate(toTimeZone(window_start, 'America/New_York')) AS session_date,
           toFloat64(argMin(open, window_start)) AS first_print,
           toFloat64(argMax(close, window_start)) AS last_print
    FROM global_markets.delayed_stocks_minute_aggs
    WHERE ticker = 'SPY'
      AND toDate(toTimeZone(window_start, 'America/New_York')) BETWEEN toDate('2023-12-01') AND toDate('2026-07-31')
      AND (toHour(toTimeZone(window_start, 'America/New_York')) * 60
           + toMinute(toTimeZone(window_start, 'America/New_York'))) BETWEEN 570 AND 959
    GROUP BY session_date
),
sequenced AS (
    SELECT session_date,
           first_print,
           last_print,
           any(last_print) OVER (ORDER BY session_date ASC
                                 ROWS BETWEEN 1 PRECEDING AND 1 PRECEDING) AS prior_close
    FROM sessions
)
SELECT session_date AS expiration_date,
       formatDateTime(session_date, '%b %e, %Y') AS expiry_label,
       round((first_print / prior_close - 1) * 100, 2) AS overnight_gap_pct,
       round((last_print / first_print - 1) * 100, 2) AS friday_session_pct
FROM sequenced
WHERE prior_close > 0
  AND session_date >= toDate('2024-01-01')
  AND toDayOfWeek(session_date) = 5
  AND toDayOfMonth(session_date) BETWEEN 15 AND 21
ORDER BY expiration_date

Read the two columns as two separate risks. Across the 29 monthly expirations inside the window, opening print at Jan 19, 2024 land 0.25% from Thursday close, and the session after that move 1%. At Jul 17, 2026, the same pair measure -1.16% and 0.15%. PM settled holder own the second column and fit trade through am. AM settled holder own the first and no fit trade again.

Same strike, two settlement prices

Hold everything constant except settlement convention. Take one call with strike at the nearest whole dollar to Thursday closing price, the last level wey AM settled holder fit trade against. AM payoff na Friday opening print minus the strike, floored at zero. PM payoff na Friday closing price minus the strike, floored at zero. Same strike, same underlying, same expiration date, two numbers.

WITH sessions AS (
    SELECT toDate(toTimeZone(window_start, 'America/New_York')) AS session_date,
           toFloat64(argMin(open, window_start)) AS first_print,
           toFloat64(argMax(close, window_start)) AS last_print
    FROM global_markets.delayed_stocks_minute_aggs
    WHERE ticker = 'SPY'
      AND toDate(toTimeZone(window_start, 'America/New_York')) BETWEEN toDate('2023-12-01') AND toDate('2026-07-31')
      AND (toHour(toTimeZone(window_start, 'America/New_York')) * 60
           + toMinute(toTimeZone(window_start, 'America/New_York'))) BETWEEN 570 AND 959
    GROUP BY session_date
),
sequenced AS (
    SELECT session_date,
           first_print,
           last_print,
           any(last_print) OVER (ORDER BY session_date ASC
                                 ROWS BETWEEN 1 PRECEDING AND 1 PRECEDING) AS prior_close
    FROM sessions
),
expirations AS (
    SELECT session_date,
           first_print,
           last_print,
           round(prior_close, 0) AS strike,
           abs(first_print / prior_close - 1) * 100 AS gap_abs_raw
    FROM sequenced
    WHERE prior_close > 0
      AND session_date >= toDate('2024-01-01')
      AND toDayOfWeek(session_date) = 5
      AND toDayOfMonth(session_date) BETWEEN 15 AND 21
)
SELECT formatDateTime(session_date, '%b %e, %Y') AS expiry_label,
       round(gap_abs_raw, 2) AS gap_abs_pct,
       round(greatest(first_print - strike, 0), 2) AS am_settlement_usd,
       round(greatest(last_print - strike, 0), 2) AS pm_settlement_usd,
       round(abs(greatest(last_print - strike, 0) - greatest(first_print - strike, 0)), 2) AS settlement_spread_usd
FROM expirations
ORDER BY settlement_spread_usd DESC
LIMIT 10

The widest split among the 29 expirations happen at Dec 20, 2024, when opening print sit 0.74% away from Thursday close. AM version of the call settle at $0 and PM version at $4.87, giving difference of $4.87 per share. Listed option cover 100 shares, so cash difference on one contract na one hundred times that amount. Tenth on the ranking, Jun 20, 2025, still split $1.38 per share.

The contract na hypothetical. SPY options be PM settled for real, and this exercise isolate the settlement price while strike, underlying and day remain the same.

Why the difference dey gather around triple witching mornings

Triple witching na quarterly session when stock index futures, stock index options and single stock options all expire (triple witching cover the mechanic, while the 2026 triple witching dates list the calendar). The AM settled contracts among dem reference the same opening quotation, wey dem calculate once.

WITH sessions AS (
    SELECT toDate(toTimeZone(window_start, 'America/New_York')) AS session_date,
           toFloat64(argMin(open, window_start)) AS first_print,
           toFloat64(argMax(close, window_start)) AS last_print,
           toFloat64(sumIf(volume, (toHour(toTimeZone(window_start, 'America/New_York')) * 60
                + toMinute(toTimeZone(window_start, 'America/New_York'))) = 570)) AS open_minute_shares
    FROM global_markets.delayed_stocks_minute_aggs
    WHERE ticker = 'SPY'
      AND toDate(toTimeZone(window_start, 'America/New_York')) BETWEEN toDate('2023-12-01') AND toDate('2026-07-31')
      AND (toHour(toTimeZone(window_start, 'America/New_York')) * 60
           + toMinute(toTimeZone(window_start, 'America/New_York'))) BETWEEN 570 AND 959
    GROUP BY session_date
),
sequenced AS (
    SELECT session_date,
           first_print,
           last_print,
           open_minute_shares,
           any(last_print) OVER (ORDER BY session_date ASC
                                 ROWS BETWEEN 1 PRECEDING AND 1 PRECEDING) AS prior_close
    FROM sessions
),
labelled AS (
    SELECT session_date,
           multiIf(toDayOfWeek(session_date) = 5
                       AND toDayOfMonth(session_date) BETWEEN 15 AND 21
                       AND toMonth(session_date) IN (3, 6, 9, 12), 'triple witching Friday',
                   toDayOfWeek(session_date) = 5
                       AND toDayOfMonth(session_date) BETWEEN 15 AND 21, 'other monthly expiration',
                   'ordinary session') AS bucket,
           abs(first_print / prior_close - 1) * 100 AS gap_abs_raw,
           abs(greatest(last_print - round(prior_close, 0), 0)
               - greatest(first_print - round(prior_close, 0), 0)) AS spread_raw,
           open_minute_shares / 1000000 AS open_minute_millions
    FROM sequenced
    WHERE prior_close > 0
      AND session_date >= toDate('2024-01-01')
)
SELECT bucket,
       count() AS group_size,
       round(quantileDeterministic(0.5)(gap_abs_raw, cityHash64(session_date)), 2) AS median_gap_abs_pct,
       round(quantileDeterministic(0.5)(spread_raw, cityHash64(session_date)), 2) AS median_settlement_spread_usd,
       round(quantileDeterministic(0.5)(open_minute_millions, cityHash64(session_date)), 2) AS median_open_minute_volume_m
FROM labelled
GROUP BY bucket
ORDER BY group_size ASC

Run the hypothetical across all 618 ordinary sessions too, and the arithmetic itself no look unusual. Median settlement difference measure $0 on triple witching Fridays, $0.8 on other monthly expirations and $0.95 on ordinary session. Median overnight gap follow the same pattern, at 0.49% and 0.28% respectively.

Wetin make the morning different na traffic. SPY opening minute trade 0.95 million shares at the median on triple witching Fridays, compared with 0.62 million on ordinary session. One quarter's AM settled index positions cash out against prints inside that window, together with index futures rolling and single stock options expiring that afternoon. Where the open interest dey by strike na another subject (max pain).

Why settlement value fit sit for level wey index never print

Published index level dey calculate continuously from last sale prices, so e only show prices wey exist together. Special opening quotation dey calculate once, from set of prices wey never coexist. Fastest components print at 9:30:00, while slowest fit take minutes, and index dey move during that time. The quotation na arithmetic combination of first prints, no be direct observation of the index.

Two things holder fit check for the tape:

• Settlement value fit fall outside the range wey index publish all morning. Nothing spoil when that happen. That number never be level wey anybody trade.
• The wider the spread among those first prints, the further quotation fit sit from the index own first tick (why spreads widen at the open explain why opening minutes get the loosest quotes of the session).

WITH sessions AS (
    SELECT toDate(toTimeZone(window_start, 'America/New_York')) AS session_date,
           toFloat64(argMin(open, window_start)) AS first_print,
           toFloat64(argMax(close, window_start)) AS last_print
    FROM global_markets.delayed_stocks_minute_aggs
    WHERE ticker = 'SPY'
      AND toDate(toTimeZone(window_start, 'America/New_York')) BETWEEN toDate('2023-12-01') AND toDate('2026-07-31')
      AND (toHour(toTimeZone(window_start, 'America/New_York')) * 60
           + toMinute(toTimeZone(window_start, 'America/New_York'))) BETWEEN 570 AND 959
    GROUP BY session_date
),
sequenced AS (
    SELECT session_date,
           first_print,
           last_print,
           any(last_print) OVER (ORDER BY session_date ASC
                                 ROWS BETWEEN 1 PRECEDING AND 1 PRECEDING) AS prior_close
    FROM sessions
)
SELECT session_date AS expiration_date,
       formatDateTime(session_date, '%b %e, %Y') AS expiry_label,
       round(prior_close, 2) AS thursday_close,
       round(prior_close, 0) AS strike_usd,
       round(first_print, 2) AS friday_open,
       round(last_print, 2) AS friday_close
FROM sequenced
WHERE prior_close > 0
  AND session_date >= toDate('2024-01-01')
  AND toDayOfWeek(session_date) = 5
  AND toDayOfMonth(session_date) BETWEEN 15 AND 21
ORDER BY expiration_date

AM vs PM settled index options: which one be which

• AM settled: standard third Friday contracts on the S&P 500 (SPX), Nasdaq 100 (NDX) and Russell 2000 (RUT). Last trade Thursday afternoon, cash settled against Friday opening quotation.
• PM settled: SPXW weekly and end of month index contracts, cash settled against 4:00 pm ET close and trading until the bell.
• PM settled and physically settled: listed ETF options like SPY, QQQ and IWM. American style, and shares dey deliver on assignment.
• Wednesday exception: VIX options and futures settle against special opening quotation on Wednesday morning instead of Friday.

Root symbol na the clue. For S&P 500, SPX na the AM settled third Friday contract, while SPXW na the PM settled weekly. Two roots on one index, settling hours apart against two different prices.

FAQ

Wetin AM settled mean for options?

AM settled mean say contract cash out against special opening quotation built from expiration morning opening prints, instead of closing price. For S&P 500, dem publish that figure under ticker SET. Contract final trade happen the previous afternoon.

AM settled options dey trade on expiration day?

No. Standard third Friday index option make its last trade on Thursday afternoon before expiration. Settlement number form the next morning, and holder no fit close or roll the position in between.

SPY options na AM or PM settled?

PM settled. Listed ETF options like SPY, QQQ and IWM settle against 4:00 pm ET closing price, trade until closing bell, and deliver shares on assignment instead of cash.

Why settlement price fit differ from index open?

Index open na one moment of a continuously calculated level. Settlement quotation dey assemble from each component first regular session trade, and those trades land at different times. Na combination of prices wey never coexist, so e fit land outside the range wey index print all morning.

Wetin happen when third Friday na exchange holiday?

Monthly expiration move to Thursday. AM settled contract then settle against Thursday morning opening quotation and make its final trade on Wednesday afternoon. When options expire track those calendar shifts.

Every figure above come from stored query over regular session minute bars, versioned with the post. Open any panel to read the SQL, or run the same window on the Strasmore terminal.