... expires? If I'm long I get a certificate saying I own some whatever and it's being stored somewhere at such and such a cost (and money is taken from my account), right? But what if I am selling?
After (LTD) Last Trading Day, you, the "short", get "cashed-out" at your futures contract price less delivery costs and must make timely & proper delivery before (LDD) Last Delivery Day.
You won't be allowed to get that far whether long or short. Broker's don't deal with specs (assuming you're not large) who want to deliver or take delivery so you'll be ordered before expiry or notice day to cover or roll and if you don't agree the broker will close out your position.
I mistakenly let my Lean Hog futures expire and the next thing I knew, my neighbors called the police on me because I had 100 Lean little piggies grunting and snorting and smelling up my back yard. The least those batards could have done was ring my doorbell. So be careful if your in cattle or hogs and dont have a farm. sheesh
That's what I thought too. However I forgot to close out my long soymeal contracts last december and my broker MFGlobal stuck me with physical soymeal. Which incidentally I sold at a profit Better watch out.
I think that is what is supposed to happen in a perfect world... but I have heard of folks getting delivered on and having to make delivery before. You and your broker would really have to be asleep at the wheel but it can happen. Better to roll a week before you really need to just to make sure you don't get stuck and possibly held hostage by the commercials.
Hogs are cash-settled and besides, in addition to the hogs, you would have also had to have taken delivery of 5,000 bushels of corn for each hog contract so that the hogs could have something to eat before going to market.
Thanks for the numerous, and apocraphyl, anecdotes about taking delivery. But what I was wondering about, actually, two things were: Making a delivery? Supposed I was short corn? It shot up, imagine that, and I for got to cover/close or even hedge? Do I just get a bill and the cash in my account is held as collateral? (And then I go out in the open and buy it and deliver it? Secondly, how would this work, technically, with currency futures, if the value of the contract is more than what you have in your account?