Why Might a Hedger Prefer Physically-Settled Futures over Cash-Settled Ones? ⎊ Path

Why Might a Hedger Prefer Physically-Settled Futures over Cash-Settled Ones?

A hedger who needs the actual underlying asset, such as a mining operation or a custodian, will prefer physical settlement. This guarantees they receive or deliver the exact asset, eliminating basis risk.

It allows for a perfect hedge against the physical asset they hold or need to acquire. It provides certainty of asset flow.

Why Are Physically-Settled Crypto Futures Less Popular than Cash-Settled Ones?

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

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

Define the Term “Perfect Hedge.”

What Are the Key Differences in Settlement Price Calculation between Physically-Settled and Cash-Settled Futures?

What Is ‘Cash-Settled’ Vs. ‘Physically-Settled’ Crypto Futures?

What Is the Primary Goal of a “Short Hedge”?

How Does an Illiquid Spot Market Affect Basis Risk for a Crypto Hedger?

Glossar

Hedger

Action ⎊ A hedger, within cryptocurrency derivatives, fundamentally executes strategies designed to mitigate or neutralize price risk exposure.