The customary delivery procedure at the expiration of a commodity futures contract is:
A) delivering the commodity to the futures buyer.
B) delivering the commodity to the futures exchange.
C) offsetting the initial futures position and settling in cash.
D)adding the profit or loss to your margin account and continuing to trade.

Question

Quizplus · Accepted Answer

The customary delivery procedure at the expiration of a commodity futures contract is to offset the initial futures position and settle in cash. This means that the futures buyer and seller will not physically exchange the underlying commodity, but instead will settle the contract based on the difference between the initial futures price and the prevailing market price at expiration. This is more common than actual delivery, as most traders engage in futures trading purely for speculative purposes and are not interested in taking physical delivery of the commodity.

The Customary Delivery Procedure at the Expiration of a Commodity