> For the complete documentation index, see [llms.txt](https://help.rails.xyz/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://help.rails.xyz/trading/options/expiry-and-settlement.md).

# Expiry & Settlement

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#### New to Options?

If you have never traded options before, we recommend starting with our [Intro to Options](/trading/options/intro-to-options.md) article before proceeding through this section.
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Options on Rails settle automatically at expiry using the Settlement Price (the published mark price at expiry.) All weekly and monthly contracts settle automatically at 08:00 UTC on their expiry date. Rails options are [cash-settled](/trading/options/intro-to-options.md#what-is-an-option), so settlement does not require delivery of the underlying asset. Instead, the final contract value is applied as cash P\&L.

### Contract Expiry

At the contract’s expiry time, Rails evaluates each option against the Settlement Price and applies the settlement outcome automatically:

* [**In-the-money**](/trading/options/intro-to-options.md#intrinsic-value-time-value-and-moneyness) contracts pay out their intrinsic value automatically — a call pays the settlement price minus the strike, and a put pays the strike minus the settlement price.
* [**Out-of-the-money**](/trading/options/intro-to-options.md#intrinsic-value-time-value-and-moneyness) contracts expire worthless.

If a contract finishes in the money, Rails credits or debits the resulting cash-settled P\&L to the account as part of the settlement process.

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You **do not need to manually exercise** eligible contracts.
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### Settlement

Settlement is processed as a single account update that includes:

* Settlement P\&L
* Premium & Payoff Reconciliation
* Delivery Fees
* Margin release

Each step is described in detail below:

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### Settlement P\&L Applied

Your Realized P\&L is calculated at expiry, *before* fees, using the formulas below:

* **Long call:** $$P\&L = \max(F - K,0) - p\_{paid}$$
* **Long put:** $$P\&L = \max(K - F,0) - p\_{paid}$$
* **Short call:** $$P\&L = p\_{rcvd} - \max(F - K,0)$$
* **Short put:** $$P\&L = p\_{rcvd} - \max(K - F,0)$$

Where:

* $$p$$ = Premium
* $$K$$= Strike Price
* $$F$$ = Forward Price

The amounts calculated are applied to your account immediately.
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### Premium & Payoff Reconciliation

At settlement, if the contract is ITM, the contract seller pays the [intrinsic value](/trading/options/options-metrics-guide.md#intrinsic-value) to the buyer, else the contract expires worthless.

**For calls:** $$PO = Q \times \max(F - K,\ 0)$$

**For puts:** $$PO = Q \times \max(K - F,\ 0)$$

Where $$PO = \text{Payoff}$$

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An out-of-the-money contract settles for zero. Long holders receive the payoff and short holders pay it.
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The amounts calculated are applied to your account immediately.
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### Delivery Fee

At settlement, the contract may be subject to a delivery fee. The delivery fee rate is **0.015%** of the Index Price per contract., calculated as:

$$Fee\_{del} = (0.00015 × P\_{index}) × Q$$

Where:

* $$P\_{index}$$ = the Index Price
* $$Q$$ = the contract quantity

**Long positions may pay the delivery fee. Short positions do not.**

This applies to both long calls and long puts. The fee scales with contract quantity and Index Price. Larger positions and higher prices result in a larger fee.

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The delivery fee differs from the [transaction fee](/trading/options/options-metrics-guide.md#transaction-fee), which applies to trades placed before expiry, not to settlement.

If you were short an option through expiry, a delivery fee of 0.00 is expected and correct.
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If the Delivery Fee applies to you, this amount will be deducted from your account immediately.
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### Margin Release

Any margin supporting the expired position is released to your available balance when settlement completes.
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