The general practice is: after the two sides reach an agreement, they apply to the futures exchange for cash conversion within the relevant period. With the consent of the futures exchange, both parties shall close their positions separately by the futures exchange according to the agreed closing price. Moreover, according to the agreed spot trading agreement, both parties need to carry out spot exchange of the same kind and quantity as the subject matter of the futures contract.
Note: Spot buyers hold long positions in the futures market, while spot sellers hold short positions in the futures market.
Two. Cash flow during the period
The specific process is shown in the figure below.
Note: Some procedures are different in different exchanges. The cash-to-cash business of Dalian Commodity Exchange is handled online. For details, please consult official website and major exchanges.
Three. Advantages of cash during the period
For general spot trading and futures delivery, the advantages of cash conversion are as follows:
1. Cash installment can effectively improve the utilization rate of funds;
2. Futures cashing can lock in futures and spot market risks at the same time;
3. Cash-out of futures can save the delivery cost of both sides of futures trading;
4. Cash exchange can save the buyer's transportation cost in spot transaction.