# Settlement value

#### What does settlement value mean?

The settlement value is the amount a contract holder may receive for it when it’s held until expiration. The settlement value of a binary options contract is \$100. The settlement value of a variable payout contract is the amount of contract value remaining, based on whether it was bought or sold. The difference between the price at which the contract was bought or sold, and the settlement value, determines the profit or loss (excluding any applicable exchange fees).

## Examples of settlement value in practice

For these examples, let’s say the settlement price for all contracts expiring at the same time is 1.1009.

Binary option strike: EUR/USD > 1.1000

The settlement price of 1.1009 is higher than the strike, meaning the buyer receives the payout.

Settlement value for seller: \$0

Knock-out: EUR/USD 1.0900 – 1.1150 (\$250 contract)

For this example, let’s say the buyer and seller matched a trade at 1.1050. The buyer paid \$150 to secure the trade, and the seller paid \$100.

Settlement value for buyer = \$109. This means they take a loss of \$41*, as they paid \$150.

Settlement value for seller = \$141. This means they make a profit of \$41*, as they paid \$100.

Call spread: EUR/USD 1.1000 – 1.1250 (\$250 contract)

For this example, let’s say the buyer and seller matched a trade at 1.1050. The buyer paid \$50 to secure the trade, and the seller paid \$200.

Settlement value for buyer = \$9. This means they take a loss of \$41*, as they paid \$50.

Settlement value for seller = \$241. This means they make a profit of \$41*, as they paid \$200.

*Excluding exchange fees