What settlement does
At 16:00 ET the platform walks your open positions and resolves each one against the day's closing price. There are only two outcomes: a leg either expires worthless, or it finishes in the money and settles for cash.
No cash changes hands — the leg simply drops off the book.
Cash-settles for (close − strike) × 100 — a long receives it, a short pays it.
Cash-settles for (strike − close) × 100 — a long receives it, a short pays it.
Out-of-the-money options simply expire — no cash changes hands. In-the-money options produce a settlement cash flow, recorded as an exercise transaction.
Cash settlement
SPX (and the related index products NDX, VIX, and XSP) are cash-settled — there are no shares to deliver. An in-the-money option settles for its intrinsic value, and which side of the strike matters:
(close − strike) × 100
(strike − close) × 100
per contract. A long in-the-money option receives this value; a short in-the-money option pays it. Each exercise also incurs the $5.00-per-strike settlement fee — once per in-the-money strike, no matter how many contracts settle there.
Drag the close, or use the slider. Below 5,950 the call expires; below 5,920 the short put engages; below 5,900 the whole put spread is in the money and nets to its width.
Gross settlement
Sum of every leg's cash flow
Exercise fees
$5.00 per in-the-money strike
Net cash
Settlement, fees out
Spreads are netted
Every in-the-money leg settles on its own: each becomes a separate exercise transaction at its own strike, carrying its own $5.00 settlement fee — the short leg is debited, the long leg credited. Nothing is suppressed or merged, so a fully in-the-money spread books two exercises. What holds the risk in check is the arithmetic: the short leg's debit and the long leg's credit net to exactly the spread width, so a defined-risk structure can never cost more than its width, however deep in the money it closes.
In practice
Settlement is computed up front, so its entries sit in your transactions all day — dated at the close, above the current simulation time line and dimmed, the day's projected outcome for the orders you hold right now. Advance time to 4:00 PM ET (or later) and they cross below that line, your realized P&L updates, and the day is marked settled. Rewind before the close and the day re-opens for editing, with those entries back above the line where the clock has yet to reach them — like everything else in Practice, settlement is just a view of a precomputed result.
On a live account
In live trading, settlement runs automatically once the official closing tick for the day arrives — usually moments after 4:00 PM ET. Until that tick lands, the day is "closed but not yet settled" and your positions hold their last value. Once settlement completes, the day's closing balance carries into the account and it moves into your history alongside your other days. The Replay view counts down until the settled day is ready to review.
Tips
A short strike sitting a few points from the SPX price in the final minutes can flip from worthless to fully in the money on the closing print. If you don’t want your P&L decided by the last tick, close the position — buying back a near-worthless short costs a couple of dollars in premium and fees and removes the coin flip.
An out-of-the-money leg expires free; an in-the-money leg pays $5.00 per strike to settle. For a spread that’s barely in the money, closing it before 4:00 PM ET is often cheaper than letting both legs settle.
On a live account it’s the settlement step — not you — that turns the day’s result into the account’s new cash balance. A day that traded can’t be discarded precisely so this step can never be skipped.