US futures options: physical delivery processing

For futures options, physical delivery typically occurs on the day (T+1 day) after the expiration date (T day). Investors may continue to trade the underlying futures contracts before the physical delivery is settled. Futures contracts that result from physical delivery will begin on T+1 day at the strike price indicated in the options contract. However, the settlement date will be recorded as T day in the system. At Futu, all futures accounts follow the First In First Out (FIFO) rule which requires trades opened first to be closed first. A new position resulting from a futures trade in the opposite direction on T+1 day must be closed by the physical delivery position with a settlement date of T day if it occurs before the physical delivery settles. This creates a conflict with the settlement, which doesn't allow a T day trade to close a T+1 trade. Due to the FIFO rule and to ensure a successful settlement process, physical delivery is processed using additional futures trade entries with no impact on your futures account P/L calculation.

You hold E2C 231011 4455P options with an expiration date of October 11th, which will open a short position in ES2312 futures after physical delivery on October 12th.

• Your positions: 1 futures contract (ES2312) + 3 futures options contracts (E2C 231011 4455P)

Transaction	Transaction Activity			Real-Time Position
	Symbol	Quantity	Settlement Date
1	ES2312	+1	10/11	+1
2	ES2312	+1	10/11	+2
3	E2C 231011 4455P	+3	10/11	+3
4	ES2312	-1	10/12	+1

• Your futures options contract undergoes physical delivery (E2C 231011 4455P). • Your futures position (ES2312) becomes -2 through Transactions No.5-8 after physical delivery. • Your futures options position (E2C 231011 4455P) becomes 0 through Transaction No.9 after physical delivery.

Transaction	Transaction Activity			Real-Time Position
	Symbol	Contract Quantity	Settlement Date
1	ES2312	+1	10/11	+1
2	ES2312	+1	10/11	+2
3	E2C 231011 4455P	+3	10/11	+3
4	ES2312	-1	10/12	+1
5	ES2312	-3	10/11	-2
6	ES2312	+3	10/12
7	ES2312	-1	10/12
8	ES2312	-2	10/12
9	E2C 231011 4455P	-3	10/11	0

• Your positions on October 11th and October 12th are in the table below.

• Short and long positions exist simultaneously on October 11th.

Date	Symbol	Long Position	Short Position
10/11	ES2312	+2	-3
	E2C 231011 4455P	+3	-3
10/12	ES2312	0	-2

 

American style futures options may be exercised or assigned early, prior to the expiration date when the options and underlying futures contracts are still available for trading. Due to the FIFO rule and to ensure a successful settlement process, physical delivery is processed using additional futures and options trade entries with no impact on your futures account P/L calculation.

You hold futures options contracts (EW 231031 4455P) which will open a short position in futures (ES2312) after physical delivery.

• Your positions: 1 futures contract (ES2312) + 2 futures options contracts (EW 231031 4455P)

Transaction	Transaction Activity			Real-Time Position
	Symbol	Contract Quantity	Settlement Date
1	ES2312	1	10/11	+1
2	ES2312	1	10/11	+2
3	EW 231031 4455P	+3	10/11	+3
4	ES2312	-1	10/12	+1
5	EW 231031 4455P	-1	10/12	+2

• Your futures options contract undergoes physical delivery prior to expiration (EW 231031 4455P). • Your futures position (ES2312) becomes -2 through Transactions No.6-9 after physical delivery. • Your futures options position (EW 231031 4455P) becomes -1 through Transaction No.10-13 after physical delivery.

Transaction	Transaction Activity			Real-Time Position
	Symbol	Contract Quantity	Settlement Date
1	ES2312	1	10/11	+1
2	ES2312	1	10/11	+2
3	EW 231031 4455P	+3	10/11	+3
4	ES2312	-1	10/12	+1
5	EW 231031 4455P	-1	10/12	+2
6	ES2312	-3	10/11	-2
7	ES2312	+3	10/12
8	ES2312	-1	10/12
9	ES2312	-2	10/12
10	EW 231031 4455P	-3	10/11	-1
11	EW 231031 4455P	+3	10/12
12	EW 231031 4455P	-2	10/12
13	EW 231031 4455P	-1	10/12

• Your positions on October 11th and October 12th are in the table below.

• Short and long positions exist simultaneously on October 11th.

Settlement Date	Symbol	Long Position	Short Position
10/11	ES2312	+2	-3
	EW 231031 4455P	+3	-3
10/12	ES2312	0	-2
	EW 231031 4455P	0	-1