Physical Delivery Vs Cash Settlement
Do You Know the Difference?
Listen to the first 26 minutes of this podcast. Michael Dunn, the President of Bitnomial will educate you about what is happening in the market regarding deliverables. It’s a good chat. Michael does a good job of explaining why institutions are starting to flock to physical delivery.
I don’t know if you saw the Cliff Asness tweet or not.
FYI, justice will not be served, cheaters win, Chinese nickel lord oligarchs win, dough faced thieving oligarch toadie Matty Chamberlain keeps his promotion for stealing, the revolution will not be televised, and sir, the UK courts are indeed an Arby’s.
It was in response to this article, and the outcome of the lawsuit over the fraud perpetrated by the London Metal Exchange on the nickel marketplace last July. Asness fund was ripped off by the LME protecting a Chinese trader. It makes a mockery of their exchange, and the marketplace.
When it happened, I urged a reputable exchange that competed with LME to list nickel. They might have been able to steal the contract away.
Nickel was a physically settled commodity. At commodity exchanges, contracts are often settled in cash. On settlement day, the clearing house sweeps the accounts and those that owe get collected from, and those that are up on trades get paid. Cash settlement is easy. It’s simple. In some cases, like S+P 500 futures, it’s more elegant to cash settle than try to physically deliver and settle.
In other markets, physical delivery happens. This is more difficult to execute. There needs to be exchange-approved delivery facilities. When you traded cattle, you got an actual receipt of the cattle you owned at the feedlot if you took delivery. If you trade crude oil, they make you pick up the oil in Cushing, Oklahoma. Same with grains and also the same with US Treasury futures. Sometimes at the end of the contract’s life, there is a short or long squeeze as traders scramble in the cash market to find treasuries to deliver.
Bitnomial is the only regulated futures exchange in the world that delivers physical cryptocurrency. They are CFTC-regulated and follow the rules, unlike other exchanges out there. They have a Compliance Department. Arbitration. Rules of trading. Folks it is a real live exchange and many participants are waking up to the fact that cash-settled futures contracts are not a great hedge for cryptocurrency. They are merely good scalping vehicles.
Physical delivered contracts generally trade less volume than cash-settled ones. The threat of actual delivery keeps potential participants out.
Unusual Whales tweeted this morning that Bitcoin miners are going "mine and hold" to try and drive the price up. The best place for a buy and hold physical commodity hedging strategy is in a physically delivered market. Gold is better hedged physical than cash.
I would like to know more about Binomial and how physical delivery of BTC would work. I have my own wallets. Is it like that? Or is it more like LedgerX.com where you can trade futures contracts and options on various Cryptos.
I am currently working on opening an IRA Custodial account for some gold and silver. The trust I have chosen allows RE and you are able to hold your own physical crypto in an approved IRA wallet.
If you don't want to write publicly about please email me. Thank you, you provide me with...some...entertaining writing:) and some valuable insights into CBOE or CBOT or wherever it was you traded in the pits in Chicago. But Vegas? Not for me. I am headed to the Ozarks, probably northern Arkansas. Love Sarah Sanders. I think/hope when the Feds expand the crack down on us "White Supremacists/Christian Nationalists/Terrorists, etc. etc." she will have the stones to tell the Feds to pound sand, they aren't bringing that unconstitutional s*** here.