Explanation: The delivery method refers to the way in which the buyer and the seller settle the contract value when the futures contract expires. There are two ways of delivery: physical delivery and cash delivery. Physical delivery refers to the actual delivery and payment settlement of the subject matter according to the time, place, quantity and quality agreed in the contract. Cash delivery refers to the cash settlement of the contract price difference between the buyer and the seller according to the time and price stipulated in the contract. If the futures contract adopts physical delivery, then both the buyer and the seller have no delivery authority and must perform according to the contract. If the futures contract is delivered in cash, then both the buyer and the seller have the right to deliver, and they can choose to close their positions or exercise their rights before the expiration date.
The settlement price of delivery refers to the price used to calculate the cash delivery when the futures contract expires. The settlement price for delivery shall be determined and published by the exchange in accordance with the method agreed in the contract. Different futures contracts have different settlement price calculation methods, which are generally related to the price or index of the subject matter. If the futures contract is delivered in cash, the buyer and the seller can judge whether it is beneficial to exercise their rights or close their positions according to the settlement price, so as to decide whether to use the delivery right.
Extended content: Different types of futures contracts have different delivery methods and settlement prices. For example, the stock index option contract is an option contract with the stock index as the subject matter, and its delivery method is cash delivery, and its settlement price on the last trading day is the average price of the index in the last two hours. The futures contracts of copper, aluminum, zinc and other metals in Shanghai Futures Exchange are delivered in kind, and the settlement price on the last trading day is the weighted average price of the closing price of the last three working days.