How do Commodities Settle?
Commodity contract settles in 2 ways which is as below :
Cash Settlement : The cash settlement method of settling commodities does not involve the physical delivery of the asset(s) under consideration. It instead involves the settlement of net cash on the settlement date. Cash settlement involves the purchaser or the contract holder to pay the net cash amount on the settlement date and execute the commodity settlement. The net cash amount is the difference between the spot price (SP) and the futures price (FP) of the underlying(s).
Physical Delivery : The physical delivery method of settling commodities involves the literal physical delivery of the underlying asset(s) on the settlement date of the contract. The physical delivery settlement process is coordinated and settled via a clearing broker or a clearing agent. If the contract holder opts to take a short position, they are responsible for the physical delivery of the commodity. If the holder opts to take a long position, they will be taking, i.e., receiving physical delivery of the commodity.
Related Articles
Why Trade in Commodities?
Commodities prices are relatively less affected by factors influencing the stock markets, and hence, offer an excellent avenue of portfolio diversification for investors. Along with diversification and predictability, an investor can also take ...
Can I trade in commodities and Currency in InstaOptions?
InstaOptions currently supports NIFTY, BANKNIFTY, and FINNIFTY, along with Stock Options. We do not support any commodity options as of now. This is because commodity options lack liquidity. Also, we do not support any currency pairs as of now. ...
What is Commodity Trading?
Commodities Trading involves trading in every kind of movable property other than actionable claims, money and securities. These include gold, silver and other metals and select agricultural commodities such as grains, pulses, spices, oils and ...
Circular Number - 14/10/2025
MCX and NSE Commodity Circular - Revision in Trading Hours
Circular Number : 17-02-2026
MCX Circular - Revision in Trading Hours