Cash settlement

Cash settlement is the settlement of an expiring futures contract by a cash payment equal to the difference between the final settlement price and the price of the last daily settlement, instead of a transfer of the underlying. Equity index futures such as ES and NQ settle this way against a value derived from the index.

Senzoukria · Glossary · Updated September 2026

Definition

The CFTC glossary defines cash settlement as a method of settling futures, options and other derivatives whereby the seller pays the buyer the cash value of the underlying commodity. In futures practice positions are marked to market every day, so at expiry the final cash flow is the move from the previous settlement to the final settlement price.

Worked example

A trader holds one long ES contract bought at 5,010.00 into expiry, and the final settlement price is 5,000.00. The total result is (5,000.00 − 5,010.00) × $50 = -$500. Daily mark-to-market has already moved most of that amount; the expiry payment only covers the difference between the last daily settlement and the final one.

What cash settlement changes

  • No delivery obligation, so no first notice day and no need to exit before a delivery period.
  • The roll is driven by the last trading day and by where volume goes, not by delivery logistics.
  • The final price is computed by a procedure, which can differ from the last traded price of the contract.
  • Convergence is exact by construction: the contract ends on the reference value.

Why it matters for index futures traders

For ES and NQ the final settlement is based on a special opening quotation of the index on expiration Friday, built from the opening prices of the component stocks. A position held into that process is exposed to how the index opens, not to the futures tape, which is one reason many traders roll or close before.

In Senzoukria

The expiring contract stays in the symbol picker until its last trading day and disappears the day after. The application does not compute final settlement values; P&L after expiry is the broker's statement, not something the chart can reproduce.

Common mistakes

  • Assuming the final settlement equals the futures price at the last trade.
  • Believing that cash-settled means the position is safe to hold through expiry without looking.

In the same section

Sources

This page in other languages

Frequently asked questions

Which CME futures are cash-settled?
The E-mini and Micro E-mini equity index futures are cash-settled, as are some agricultural contracts such as lean hogs and feeder cattle. The settlement method is stated in each contract's specification.
Is there any delivery risk with ES?
No delivery risk, since nothing is delivered. The risk at expiry is the difference between the last price you could trade and the final settlement value set from the index open.

Keep reading

Strategy researchTest a trading strategy, from observation to challenge rulesDefine an observation, question it with the copilot, write a rule and explore costs, drawdown and fictional challenge limits in an interactive example.Quant · Start hereQuant trading for beginners: from idea to backtestDefine a testable rule, choose suitable data and evaluate later periods after costs.Order flow · HubOrder flow trading: the complete guideThe hub. What order flow is, what it shows — aggression, delta, imbalance, absorption, liquidity — and the tools that read it, each linked to a full guide.