Why are most futures contracts not settled through delivery of the product?
A) Most contracts are settled through the margin account.
B) Most contracts expire with neither party having an obligation to the other party.
C) Most participants cancel their futures contracts through purchase of an option contract.
D) It is easier and cheaper to settle in cash or by an offsetting futures transaction.

Question

Quizplus · Accepted Answer

It is easier and cheaper to settle in cash or by an offsetting futures transaction. Settlement through delivery of the product requires physical delivery and storage of the underlying commodity, which can be costly and impractical for many traders. Cash settlement or offsetting futures transactions allow for easier and more efficient settlement of futures contracts.

Why Are Most Futures Contracts Not Settled Through Delivery of the Product