hi, If I buy an "equity index future contract", at a price of £100, at the settlement date of 10/1. Suppose at 10/1, price of that equity index future contract is £110 At 10/1, what I should do? I think there are 2 possible actions. I hope that you can tell me any problems in my actions action1: close out I sell that contract at £110, and hence to make a profit of £10 action2: pay the strike price and take the underlaying asset. ......what asset will be delivered to me?
In theory the seller could physically deliver the index - ie deliver a portfolio of stocks that exactly replicated the index at expiry. However this would be an almighty hassle for seller and buyer so in practice the contract would be cash settled, so you will get £10.
