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.