How Are Crypto Futures Contracts Typically Settled?
Crypto futures contracts are predominantly settled in cash, meaning the difference between the contract price and the settlement price is exchanged in fiat or stablecoins, rather than physical delivery of the underlying cryptocurrency. Some platforms offer physical settlement, but cash settlement is more common, especially for perpetual futures.
Glossar
Settlement Price
Price ⎊ The settlement price, within cryptocurrency derivatives, options trading, and broader financial derivatives contexts, represents the final agreed-upon value at which a contract expires or is otherwise terminated.
Physical Delivery
Delivery ⎊ Physical Delivery in a derivative contract signifies the actual transfer of the underlying crypto asset from the seller to the buyer upon exercise or settlement, as opposed to a cash-settled exchange of net differences.
Cash Settlement
Settlement ⎊ Cash settlement, within cryptocurrency derivatives and options trading, represents the fulfillment of a contract obligation through a monetary exchange rather than physical delivery of the underlying asset.
Contract Price
Definition ⎊ Contract price refers to the agreed-upon price at which a derivative contract, such as an option or future, is bought or sold.
Crypto Futures Contracts
Margin ⎊ requirements for leveraged positions are dynamically calculated based on the volatility of the underlying cryptocurrency and the current leverage ratio utilized by the trader on the centralized or decentralized exchange.
Liquidity
Trading Capacity ⎊ Liquidity describes the ease with which an asset can be bought or sold in large quantities without substantially affecting its market price, measured by volume, bid-ask spread, and order book depth.