How Does Physical Settlement Introduce More Logistical Complexity for Traders?

Physical settlement requires the precise coordination of transferring the actual underlying asset, which involves significant logistical effort. For a trader, this means arranging for the delivery or acceptance of the asset, ensuring proper storage, and managing associated transportation or network costs, such as gas fees for cryptocurrency.

Furthermore, the asset must meet specific quality and quantity standards as defined in the contract specifications. This is particularly cumbersome for non-standardized or difficult-to-store assets.