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).
Investopedia Commentary
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.
Related Links
Futures Fundamentals
Interpreting Volume for the Futures Market
Getting Started in Foreign Exchange Futures
See also: Cash Commodity, Futures Contract, Long, Short, Swap, Underlying