Which Type of Derivative Contract Is Almost Always Physically Settled?
Forward contracts on physical commodities, such as oil, corn, or gold, are almost always physically settled. These contracts are often used by producers and consumers who actually need or want to deliver/receive the physical asset.
While some commodity futures can be cash-settled, the original purpose of many commodity forwards is physical exchange.
Glossar
Physically Settled Contract
Contract ⎊ This derivative instrument mandates the actual delivery or transfer of the underlying cryptocurrency asset upon exercise or maturity, rather than a cash settlement based on the price difference.
Physically Settled
Settlement ⎊ Physically settled derivatives contracts require the actual transfer of the underlying asset from the short position holder to the long position holder at maturity.
Bitcoin Futures
Settlement ⎊ These standardized, exchange-traded contracts obligate the holder to buy or sell a specific quantity of Bitcoin at a future date for a predetermined price, forming a critical component of regulated crypto derivatives markets.