Physical delivery is the process of taking possession of a commodity that is the subject of a futures contract. The process involves the transfer of ownership from the seller to the buyer and the actual receipt of the commodity by the buyer. This is in contrast to a cash settlement, which involves the payment of cash by the buyer to the seller, without the transfer of the underlying commodity.
What means physical delivery?
The term "physical delivery" refers to the process by which a commodity is delivered to the buyer in exchange for payment. In a physical delivery transaction, the buyer and seller agree on a price for the commodity, and the seller agrees to deliver the commodity to the buyer at a specified time and place. The buyer pays for the commodity upfront, and the seller delivers the commodity as agreed.
Physical delivery is the most common method of delivery for commodities, and it is the only method of delivery available for some commodities. For example, crude oil and natural gas are typically only traded via physical delivery.
When a commodity is delivered via physical delivery, the buyer takes possession of the commodity and is responsible for any storage or transport costs. The buyer also assumes the risk of price changes, as the price of the commodity is fixed at the time of purchase.
Some commodities are traded via both physical and financial delivery. Financial delivery refers to a transaction in which the buyer and seller agree on a price for the commodity, but the commodity is not actually delivered. Instead, the buyer and seller settle their contract at the end of the agreed-upon period. Financial delivery is often used for commodities that are difficult to store or transport, such as emissions credits.
What is an EFP terminal list?
An EFP terminal list is a list of all the electronic futures and options trading platforms that are available to traders. These platforms allow traders to trade futures and options contracts electronically. The list includes all the major exchanges, as well as some of the smaller ones. Are oil futures physically settled? Oil futures contracts are standardized, exchange-traded contracts in which the contract buyer agrees to take delivery, from the contract seller, a specific quantity of oil (e.g. 1000 barrels) at a predetermined price on a future delivery date. Oil futures are traded on the New York Mercantile Exchange (NYMEX) and London's International Petroleum Exchange (IPE).
The majority of oil futures contracts are physically settled, meaning that on the delivery date, the contract buyer takes delivery of the oil from the contract seller, and the contract is then closed out. The oil is delivered to the buyer at a designated delivery point, and the buyer is responsible for any transportation costs.
Some oil futures contracts, however, are cash-settled, meaning that on the delivery date, the contract buyer and seller simply exchange cash, based on the predetermined price, and the contract is then closed out. With cash-settled contracts, the buyer does not take delivery of the oil, and so there are no transportation costs.
The choice of whether to settle a contract physically or cash-settled depends on a number of factors, including the type of oil being traded, the location of the delivery point, and the preference of the contract buyer and seller. How is physical delivery margin calculated? The physical delivery margin is the margin required to insure the delivery of the underlying commodity. It is calculated by taking the price of the commodity, subtracting the futures price, and adding the cost of carry.
What is a physical contract?
A physical contract is a contract in which the underlying asset is a physical commodity, such as gold, oil, or wheat. In a physical contract, the buyer agrees to take delivery of the commodity, and the seller agrees to provide it, on a specified date in the future. Physical contracts are traded on futures exchanges.