How Does the Margin Requirement Typically Differ between Physically and Cash-Settled Contracts? ⎊ Path

How Does the Margin Requirement Typically Differ between Physically and Cash-Settled Contracts?

Margin requirements are often higher for physically-settled contracts, especially as the settlement date approaches. This is because the clearing house needs greater assurance that the trader can deliver or take delivery of the full value of the underlying asset, not just cover potential price fluctuations.

Cash-settled contracts usually only require margin sufficient to cover the maximum expected change in the contract's value.

Does the Settlement Process for Cash-Settled Options Differ from Physically-Settled Options at Expiration?

How Does the Margin Requirement Differ between Cash-Settled and Physically-Settled Futures Contracts?

How Does a Cash-Settled Futures Contract Differ from a Physically-Settled One in This Context?

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

Why Is Variation Margin Not Typically Required for Physically-Settled Futures Contracts?

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

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

How Does Margin Requirement Differ between Physically-Settled and Cash-Settled Futures?

Glossar

Settlement Date

Finality ⎊ Settlement Date represents the chronological demarcation point wherein the unconditional transfer of an asset, or its equivalent cash value, is legally and irrevocably completed, mitigating counterparty risk within a given transaction.

Clearing House

Settlement ⎊ A clearing house, within cryptocurrency and derivatives markets, functions as an intermediary between buyers and sellers, mitigating counterparty risk through a process of novation ⎊ replacing original trade agreements with new ones directly with the clearing house.