How Does Cash Settlement Differ from Physical Settlement in a Futures Contract? ⎊ Path

How Does Cash Settlement Differ from Physical Settlement in a Futures Contract?

Cash settlement involves paying the difference between the contract price and the market price in cash at expiration. The underlying asset is never exchanged.

Physical settlement requires the seller to deliver the actual underlying asset, like a specific amount of cryptocurrency, to the buyer upon contract expiration. Cash settlement is simpler and avoids the logistical issues of asset transfer.

What Is the Key Difference between Cash Settlement and Physical Settlement in Derivatives?

How Is the Settlement Process Different for a Physically-Settled versus a Cash-Settled Derivative?

What Is the Difference between Physical Settlement and Cash Settlement for a Bitcoin Option?

What Is the Difference between Cash-Settled and Physically-Settled Futures?

How Does the Final Settlement Price (FSP) Determination Work for Cash-Settled Cryptocurrency Futures?

How Does Cash Settlement Differ from Physical Settlement in Futures Contracts?

In What Scenario Would a Hedger Prefer Physical Settlement over Cash Settlement?

What Is the Difference between Physical and Cash Settlement in Derivatives Contracts?

Glossar

Cash Settlement

Resolution ⎊ The core of a cash settlement, particularly within cryptocurrency derivatives and options trading, involves the final exchange of funds rather than the physical delivery of the underlying asset.

Physical Settlement

Delivery ⎊ The concept of physical settlement, particularly within cryptocurrency derivatives and options, signifies the actual transfer of the underlying asset ⎊ be it a digital token or a commodity ⎊ rather than a cash-based offset.