It was been fascinating to watch the change in the price of the WTI oil futures contract over the past two days. Without boring you with details, I have some investment experience but one is never too old to learn something new. I have never traded a futures contract...
I was under the impression that delivery was mostly a textbook concept and did not apply much to the real world. I thought trading futures in a way was similar to trading options in that one who initiates an opening purchase would close it out by implementing a closing sale. Investors in options rarely exercise long contracts, partly because you would be giving up the time value part of the contract. Consistent with the lack of exercising in options, I assumed that there would a lack of delivery in futures.
Based on the past couple of days, I have learned that certain institutional entities in the industry actually do deliver or take delivery of the actual commodity. I was wondering if anyone here knows the percentage of contacts that come a conclusion via delivery? Does every contract finish with a delivery or do none of the contracts finish with delivery or is the answer somewhere in between all or none?
I don't think those numbers are publicly available. I would guess that it's between 1% and 5%, closer to 1%--a very small percent of contracts are settled physically. Experienced traders please correct if I'm wrong.
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