The normal liquidation sequence of deferred settlement contracts is usually handled according to the following principles:
First-in, first-out principle: close positions in the order of opening time of trading contracts. The earliest trading contract will be closed first, and the latest trading contract will be retained.
Opening principle: close the position according to the size of the open position in the trading contract. Trading contracts with large positions will be closed first to reduce trading risks.
Principle of capital cost: close the position according to the capital cost of the transaction contract. Trading contracts with higher capital costs will be closed first to reduce the cost of holding positions and financial risks.
Deferred delivery refers to the expiration of the contract in which the delivery date agreed by the buyer and the seller is postponed to physical delivery in futures trading.
Usually about one month before the futures contract expires, the exchange will announce the contract for the next delivery month, and investors can choose to extend the original contract to a new contract term without actual delivery. This method allows investors to avoid the risk of physical delivery and extend the holding period.
The reasons why investors choose to postpone delivery may include the following:
Avoid physical delivery: For some investors, receiving and handling physical delivery may bring some troubles and costs. By choosing deferred delivery, investors can avoid actual delivery and transfer their positions to new futures contracts.
Deferred holding strategy: Deferred settlement allows investors to extend the holding period of positions to a new contract cycle. This enables investors to continue to implement their investment strategies without being restricted by the expiration of contracts.
It should be noted that deferred settlement does not apply to all futures contracts, and not all exchanges offer the option of deferred settlement. When participating in deferred settlement transactions, investors should carefully understand the relevant regulations and abide by the requirements and rules of the exchange.