AM settlement lands on a third number — the day I met SET

I believed AM-settled monthlies settled on the index open on expiration Friday.

I backtested on that belief, and carried a position overnight on the strength of the result. Then on Friday morning I looked up the settlement price and learned, for the first time, that it is not the Friday open.

2026-08-21 expiration

  Thursday close   7,641.16
  Friday open      7,665.68
  actual settle    7,687.93     ← neither one

22.25 points away from the open.

This is what I found when I went looking that day. If you also assumed "it settles on the open," this may save you the same surprise.

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1. First — AM-settled and PM-settled are different products

The same underlying index carries two settlement conventions.

	AM settlement	PM settlement
Typical	SPX monthlies (third Friday)	SPXW (Weeklys, including 0DTE)
Settles when	Expiration morning	Expiration close
Settles on	SET (below)	That day's closing value
Last trading day	🚨 The day before (usually Thursday)	Expiration day itself

The bottom row is the one that catches people.

The exchange specification reads:

"Trading in SPX options will ordinarily cease on the business day (usually a Thursday) preceding the day on which the exercise-settlement value is calculated." — Cboe, SPX product specifications, Last Trading Day

So you cannot touch an AM-settled position on Friday at all. Thursday's close is the last moment. After that you simply receive whatever number the morning produces.

2. So what is SET

The exchange defines it in one sentence.

"The exercise-settlement value, SET, is calculated using the opening sales price in the primary market of each component security on the expiration date." — Cboe

Unpacked:

SET  =  take each of the 500 components' first trade price of that day
        and run them through the ordinary index formula, once

It is not a snapshot of the index at some instant. It is 500 separate "first prints" collected and calculated a single time.

3. Why it differs from Friday's open — the components do not all open at once

This is the heart of it. 500 stocks do not begin trading simultaneously at the 9:30 bell.

Each one goes through an opening auction that establishes its official opening price. Some take seconds. Some take minutes.

That is what pulls the two numbers apart.

	Index open	SET
Calculated	Immediately at 9:30	Only after all 500 have opened
For a stock not yet open	Uses the previous close	Waits for it
So it is	New prices mixed with yesterday's	All of today's prices

⭐ At the opening bell the "index open" sits close to the previous close, because yesterday's prices are still standing in for every stock that has not opened yet.

The exchange's own description says the same thing:

"the SOQ is, by construction, anchored to no specific time of day" — CME Group

It is not "the 9:30 value." It completes at the moment the last component opens, and that moment differs every expiration.

4. So how far apart do they get — the exchange's own study

I wanted to know whether my 22 points was unusually large. It was not.

An exchange study covers 33 quarterly settlement days from March 2009 through March 2017.

Comparison	Typical difference	Range
SET vs that day's index open	centered on +0.4%	−1.0% to +1.0%
SET vs the previous close	median nearly +0.5%	−1.0% to +1.1%

(CME Group)

Measured the same way, my case looks like this:

SET vs Friday open      +22.25pt  =  +0.29%     ← inside the +0.4% center
SET vs Thursday close   +46.77pt  =  +0.61%     ← a little above the +0.5% median

The 22 points that felt large to me turned out to be ordinary. What surprised me was not the magnitude. It was not knowing the number existed.

⚠️ That sample is 33 quarterly settlement days. Monthlies expire every month, so the population is larger and the period differs. I use these only as a rough sense of scale, not as a distribution.

5. ⭐ The part that matters most — SET can be a price the index never traded

This is what actually surprised me.

"the value of the contract's underlying index SOQ may be higher than the index high for the trading session, or lower than the index low, or different to the index open" — CME Group

From the same study:

11 of 33   →  SET came in above that day's index high      (one in three)
 1 of 33   →  SET came in below that day's index low

In that sample, one settlement in three landed at a price the index did not touch all day.

It is possible because SET is an assembly of 500 first prints, and there is no instant at which all 500 stood at those prices together. That point never appears on the index chart.

No amount of chart study tells you where SET will land. It is not a value that lives on the chart.

6. What I saw on 2026-08-21

Dating this section deliberately — sections 1 through 5 hold whenever you read them; this one is a single day's observation.

Thursday close   7,641.16
Friday open      7,665.68
session low      7,660.06
session high     7,697.11
Friday close     7,674.30
──────────────────────────
SET              7,687.93     ← 9 points below the session high

SET did not exceed the high that day. But it landed 22 points above the open and 47 above Thursday's close.

My position was a call credit spread with the short 28 points above Thursday's close.

had it settled on the Friday open, 7,665.68   →  profit
settled on the actual SET,        7,687.93    →  maximum loss

Same morning, same position, opposite result. The only variable was which number I had been looking at.

7. What I decided — I close AM-settled positions at Thursday's close

This is my own decision, for three reasons.

① SET is not a number I can forecast. It is neither Thursday's close nor Friday's open. It is produced by 500 separate opening auctions, and I can watch none of them.

② It can be a price the index never traded. That breaks any risk framing built on the day's high and low — it is the "one in three" from section 5.

③ I could not act on Friday anyway. That is the rule in section 1. Thursday's close is the last trading opportunity. "Watch it in the morning and respond" was never on the menu.

Carrying an AM-settled position overnight means handing the outcome to a night I cannot act in. I am not saying it cannot be profitable. I am saying the profit would not be a result I decided — it would be a result I received.

I want to record results I decided, not results I received — so I now close my AM-settled positions at Thursday's close.

⚠️ This is my decision, not a recommendation. There are approaches built deliberately around AM settlement. But doing that knowing what SET is and doing it believing it is the Friday open are different activities. I was doing the second one, so I changed the rule.

8. Easy to confuse — the tickers look alike

In an order ticket these two are nearly indistinguishable.

What you see	What it is	On expiration day
SPX (third Friday only)	AM-settled	Trading ends Thursday's close · settles to SET in the morning
SPXW (every other expiration — and the third Friday too)	PM-settled	Trades through expiration day · settles on the close

Both list on the same third Friday. The AM-settled monthly is SPX; the third-Friday SPXW sitting alongside it is PM-settled.

👉 The check that would have caught this is confirming the settlement type before sending the order. I was not doing it.

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Closing

I do not think there is anything embarrassing about not having known this. You can trade index options for years without ever meeting it — stay in PM-settled products and it never comes up.

The problem was not that I did not know. It was that I thought I did.

I ran a backtest confident that it was the Friday open. Being confident is exactly why I never checked the premise, and never checking is why I stacked fifteen years of work on the wrong value. That part I wrote up separately.

What you don't know, you look up. What you think you know, you don't.

So this note exists for the next time I wave something through as obvious. I would like it to make me stop once.

Sources

• Cboe — S&P 500 Index Options Product Specifications · SET definition and last trading day
• CME Group — Understanding the Special Opening Quotation (SOQ) · SOQ behavior and the 33-observation study

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※ This is written for information and as a personal record. It is not a recommendation of any trade. Contract specifications can be changed by the exchange, so verify the exchange's own documents before trading. All investment decisions and their outcomes belong to the investor.