difference between final settlement price vs future price
Example :on 20th June, 2019, suppose trader A buys and trader B sells a futures contract that settles on the third Friday of September 2019. Then, on that date, A and B must perform — A agreeing to buy asset gold at dollar 100, and B agreeing to sell asset gold at dollar 100.(dollar 100 is future price) The exchange will determine a settlement price for the futures contract for that specific date. For example, if the exchange determines a settlement price of $130, then A has agreed to buy asset gold for dollar 100 but can settle the position for dollar 130, thereby realizing a profit of dollar 30. B would realize a loss of dollar 30. What is the difference between this settlement price and the everyday settlement price . Is the final settlement price predetermined. Why does the settlement not occur at the predefined future price of dollar 100? Is cash settlement done at final settlement price of 130 dollars and physical settlement at future price of 100 dollar ?
Hey arpitjjwala, I'm here because nobody responded to this thread after a few days...maybe one of these resources will help you:
I hope those threads give you a bit more insight.
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