Exchange of Futures for Cash

AAA

DEFINITION of '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 EXPLAINS 'Exchange of Futures for Cash'

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
  1. Short (or Short Position)

    1. The sale of a borrowed security, commodity or currency with ...
  2. Long (or Long Position)

    1. The buying of a security such as a stock, commodity or currency, ...
  3. Underlying

    1. In derivatives, the security that must be delivered when a ...
  4. Cash Commodity

    In futures trading, the cash commodity is delivered for payments. ...
  5. Swap

    Traditionally, the exchange of one security for another to change ...
  6. Futures Contract

    A contractual agreement, generally made on the trading floor ...
Related Articles
  1. Forex Education

    Getting Started In Foreign Exchange Futures

    Learn how these futures are used for hedging and speculating, and how they are different from traditional futures.
  2. Options & Futures

    Interpreting Volume For The Futures Market

    Learn how to read the volume reports, look at the relation to liquidity and interpret volume using open interest.
  3. Insurance

    Futures Fundamentals

    For those who are new to futures but want a solid understanding of them, this tutorial explains what futures contracts are, how they work and why investors use them.
  4. Investing Basics

    The Strange New World Of The Bitcoin Exchange Futures Market

    We explain the basics of the Bitcoin exchange and futures market.
  5. Options & Futures

    A Quick Guide for Futures Quotes

    Here is a quick guide to futures quotes.
  6. Options & Futures

    Is short selling ethical?

    Understand the concept and practice of short selling, and examine the ethical questions that some investors raise in regard to this practice.
  7. Options & Futures

    How is it possible to trade on a stock you don't own, as is done in short selling?

    Understand how the process of short selling allows a person to sell a stock he or she doesn't technically own by borrowing on margin from a broker.
  8. Options & Futures

    What kinds of restrictions does the SEC put on short selling?

    Learn about the rules and regulations on short selling enforced by the U.S. Securities and Exchange Commission, or SEC, including the uptick rule.
  9. Options & Futures

    When short selling, how long should you hold on to a short?

    Explore the reasons for short selling and the various factors that influence how long an investor may wish to maintain a short position.
  10. Mutual Funds & ETFs

    Are there leveraged ETFs that track the oil & gas drilling sector?

    Explore the investing options that are available through leveraged ETFs that can be used to track the oil and gas drilling sector.

You May Also Like

Hot Definitions
  1. Weather Insurance

    A type of protection against a financial loss that may be incurred because of rain, snow, storms, wind, fog, undesirable ...
  2. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
  3. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
  4. Federal Funds Rate

    The interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution ...
  5. Fixed Asset

    A long-term tangible piece of property that a firm owns and uses in the production of its income and is not expected to be ...
  6. Break-Even Analysis

    An analysis to determine the point at which revenue received equals the costs associated with receiving the revenue. Break-even ...
Trading Center