Futures mechanics

    What is the difference between Physical Delivery and Cash Settlement at contract expiration?

    By Easy Money Scanner · Educational reference · Not investment advice

    The short answer

    Physical delivery requires actual transfer of the underlying commodity or asset, while cash settlement pays the price difference in cash at expiration.

    How it works

    Index and financial futures typically cash-settle; commodities like crude oil or grains may require or allow physical delivery procedures.

    An example

    CL can require delivery; ES cash-settles against the index's final settlement value.

    Risk & limitations

    Retail traders holding commodity contracts into delivery risk unwanted physical obligations.

    Examples are hypothetical, not trade recommendations. US contract and regulatory references do not automatically apply in Canada. Rules, margin requirements and broker policies can change; confirm them with the relevant authority and your broker.

    Sources & further reading

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