Cryptocurrency Q&A
How are futures paid out?
How are futures paid out?
Andrea
Fri May 17 2024
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7 answers
1823
Could you please elaborate on how futures contracts are settled? I'm quite curious about the payout mechanism in this context. Do the parties involved exchange actual assets at the end of the contract, or is it all settled in cash? Also, are there any specific rules or procedures that govern the payout process? I'd appreciate it if you could break it down for me in a way that's easy to understand. Thanks in advance for your assistance.
7 answers
CryptoTamer
Sun May 19 2024
However, there are exceptional cases where futures contracts do require physical delivery. This occurs when the contract specifications mandate it or when both parties agree to settle the contract through delivery.
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Eleonora
Sun May 19 2024
In such cases, the trader who is in a long position (expecting prices to rise) will be obligated to receive the underlying asset at the contract price. Conversely, the trader in a short position (expecting prices to fall) will be required to deliver the asset.
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benjamin_stokes_astronomer
Sun May 19 2024
The cash settlement amount is determined by comparing the contract price with the market price at the time of expiration. If the underlying asset has increased in value, the trader in a long position will receive a cash payment, while the trader in a short position will make a cash payment.
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Lorenzo
Sun May 19 2024
Futures contracts are financial agreements that allow traders to buy or sell an asset at a predetermined price on a specified future date. These contracts are primarily used as a tool for hedging or speculation on the market's future direction.
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EnchantedSky
Sun May 19 2024
Typically, futures contracts are settled in cash, meaning that the trader receives or pays the difference between the contract price and the market price at the time of expiration. This eliminates the need for physical delivery of the underlying asset.
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