Exchange of Futures for Cash
A method by which opposite parties of a futures contract that has underlying cash commodities aim to close out their positions simultaneously. Also know as exchange for physicals (EFP). Investopedia Says:
This process is similar to a swap and can be completed in two ways:
1. Through a transfer of a corresponding quantity of long futures contracts from the buyer of the commodity to the seller.
2. Through a transfer of a corresponding quantity of short futures contracts from the seller of the commodity to the buyer.
In both instances, the transfer of the futures contracts must be done at a price that is mutually agreed upon. Related Terms:
Cash Commodity
Futures Contract
Long
Short
Swap
Underlying |