What is settlement?

In the context of trading securities, settlement refers to the transaction where cash is exchanged for the underlying security. A stock trade takes 2 business days (Trade date + 2 days) for the trade to settle, while options take 1 business day (Trade date + 1).

For example, assuming there are no market holidays, a stock sale on a Monday will settle on Wednesday. An option sale on a Monday will settle on Tuesday.