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Hi John, I understand futures and option very well but with the december 2008 exams, the examiner used Open and settlement for the futures figures.
my understanding of open position is that, we have short (sell now and buy later) and long(buy now and sell later) positions; both short and long are open positions. and settlement is suppose to be at the end of the relevant months.
So please what does the open and settlement mean in this question, and how do we choose the right one. Thank you.This was the only exam where the terms open and settlement are used.
Open is basically the price at the start of the day, whereas settlement is the average price for the day. (It is actually a little more complicated than that, but it is always simply the settlement price for the day that is relevant)
The settlement price does not refer to the price at the end of the contract – it is the price at which you will buy or sell ‘today’.
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