The general process of physical delivery is: the seller transports the goods to the delivery warehouse designated by the exchange within the time limit specified by the exchange, and the warehouse issues a warehouse receipt after acceptance, which becomes a standard warehouse receipt after registration by the exchange.
After entering the delivery period, the seller submits the standard warehouse receipt, and the buyer submits the full amount, and goes through the delivery formalities at the exchange.
Because ordinary futures traders don't buy and sell spot, but buy and sell futures contracts to earn the difference, they only need to know a little, and individual customers are not allowed to make physical delivery.
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Generally speaking, there are two ways of futures delivery: physical delivery and cash delivery.
Physical delivery refers to the behavior of the buyers and sellers of futures contracts to close the positions of the expired open contracts by transferring the ownership of the subject matter of futures contracts in accordance with the rules and procedures formulated by the exchange. Commodity futures trading generally adopts the way of physical delivery. After entering the delivery period, the seller submits the standard warehouse receipt, and the buyer submits the full amount, and goes through the delivery formalities at the exchange.
Physical delivery refers to the process that when a futures contract expires, both parties to the transaction settle the expired open contract by transferring the ownership of the goods contained in the futures contract. Commodity futures trading generally adopts the physical delivery system. Although the proportion of final physical delivery of futures contracts is very small, it is this very small amount of physical delivery that connects the futures market with the spot market and provides an important prerequisite for the function of the futures market.
In the futures market, physical delivery is an institutional guarantee to make futures prices and spot prices tend to be consistent. When the futures price seriously deviates from the spot price due to excessive speculation, traders will arbitrage between the futures and spot markets. When the futures price is too high and the spot price is too low, traders sell futures contracts in the futures market and buy goods in the spot market. In this way, the spot demand increases, the spot price rises, the supply of futures contracts increases, the futures price drops, and the spot price difference narrows; When the futures price is too low and the spot price is too high, traders buy futures contracts in the futures market and sell goods in the spot market. In this way, futures demand increases, futures prices rise, spot supply increases, and spot prices fall, making spot spreads tend to be normal. The above analysis shows that through physical delivery, futures and spot markets can achieve mutual linkage, and futures prices eventually tend to be consistent with spot prices, so that futures markets can really play the role of price barometer.
The general procedure of physical delivery is:
The seller shall deliver the goods to the warehouse designated by the exchange within the time limit specified by the exchange, and issue a warehouse receipt after the warehouse is qualified, which will become a valid warehouse receipt after being registered by the exchange, or directly purchase a valid warehouse receipt at the midfield; After entering the delivery period, the seller submits a valid warehouse receipt, and the buyer submits the full amount to the exchange for delivery procedures. The exchange will impose certain penalties on either buyer or seller for breach of contract. If, within a certain period of time after receiving the goods, the buyer thinks that the quantity, quality and other indicators of the goods are not in conformity with the provisions of the futures contract, he may propose mediation or arbitration, and the exchange has clear procedures and handling methods for this.
Because the purpose of futures trading is not spot trading, but to earn the difference through buying and selling contracts to preserve value, there are actually not many contracts for real physical delivery in futures trading. Too much transportation indicates poor liquidity in the midfield; Too few deliveries indicate that the market is speculative. In the mature international commodity futures market, the delivery rate is generally below 5%, and the delivery rate in China's futures market is generally below 3%.