In finance especially in a derivative market, the contracts are often executed on pre-decided settlement date. In the case of futures and options, on the settlement date, the contract seller may either opt for delivery of the underlying asset (which is termed as physical settlement) or may simply settle the net position through cash (i.e. cash settlement). in this article, we have covered Cash Settlement vs Physical Settlement in the options market.
A futures contract may either be settled through cash or physical delivery.
In the case of physical delivery, the holder of the contract will either have to take the commodity from the exchange or produce the commodity.
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