Exchange of Futures for Cash
- 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).
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.
Investment dictionary.
Academic.
2012.
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