Corporate events & settlement
What is the AM Settlement versus PM Settlement anomaly in S&P 500 legacy index options?
By Easy Money Scanner · Educational reference · Not investment advice
The short answer
Legacy SPX index options settle based on Friday morning's opening prices of index components (AM settlement), while newer products like SPXW settle on the Friday afternoon closing value (PM settlement), creating potential value divergence.
How it works
AM-settled contracts' final settlement value, the Special Opening Quotation, can differ from the prior day's closing price due to overnight news, catching option holders off guard if they assume Thursday's close applies.
An example
A trader holding a near-the-money legacy SPX option into Friday morning may find the contract settles in-the-money or out-of-the-money based on Friday's open rather than Thursday's 4pm close.
Risk & limitations
AM-settled options stop trading on Thursday, so traders cannot react to the actual Friday morning settlement price before it is determined.
Examples are hypothetical, not trade recommendations. US contract and regulatory references do not automatically apply in Canada. Rules, margin requirements and broker policies can change; confirm them with the relevant authority and your broker.