What happens when a commodity contract is due for compulsory delivery?
In commodity trading, certain futures contracts require physical delivery instead of cash settlement upon expiry. If you hold an open position in such a contract until expiry, you must either take delivery (buy position) or provide delivery (sell position) of the underlying commodity.
Key points to consider:
Compulsory delivery applies to specific commodity contracts on exchanges like MCX and NSE.
Traders must meet exchange requirements for delivery, including maintaining adequate margins.
Failure to fulfil delivery obligations may result in penalties or forced liquidation by the exchange.
Managing compulsory delivery in commodity contracts:
Exit or roll over your position before the delivery notice period if you do not intend to take or give delivery.
Ensure compliance with the exchange’s delivery process and margin requirements.
Check contract specifications to understand settlement rules before trading.
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