Complete Guide to Delivery Settlement: Automatic Settlement at Contract Expiry

Are you worried about forgetting to close positions when contracts expire? Do you want to know how delivery prices are calculated? Are you curious about the difference between delivery settlement and manual closing?

On Friday, March 15, 2023 at 16:00, Zhang Ming from Shenzhen held 10 BTC weekly contract long positions with an opening price of $25,000. He forgot to manually close, and the system automatically settled at the delivery price of $26,500, earning him $15,000. If he had closed manually earlier, he might have missed the best price due to market volatility.

On June 30, 2023, when the quarterly contract expired, Ms. Li from Shanghai held 50 ETH quarterly contract short positions with an opening price of $2,000. The delivery price was $1,800, earning her $10,000. The delivery price is the arithmetic average of the last hour, avoiding price manipulation at the last moment.

On September 29, 2023, Mr. Wang from Beijing held multiple BTC contracts with different expiry dates. Weekly contracts settled on Friday, next-week contracts settled the following Friday, and quarterly contracts settled at month-end. He achieved continuous capital utilization through proper expiry date arrangement.

Automatic closing risk at expiry: System automatically closes positions at contract expiry, unable to choose closing timing
Delivery price deviation risk: Delivery price is 1-hour average, may differ from current market price
Capital occupation risk: Funds are occupied before delivery, cannot be used for other trades
Rollover cost risk: To continue holding, need to close old contract and open new one, incurring trading fees
Liquidity risk: Liquidity may decrease near delivery, early closing may face slippage
Timezone confusion risk: Delivery time is UTC+8, users in other timezones need to note time difference

What is Delivery Settlement?

When contracts expire (such as weekly contracts expiring every Friday at 4:00 PM).

The system uses the arithmetic average of the BTC (LTC and other cryptocurrencies) USD index over the last hour as the delivery price to settle all open weekly contracts.

Profit and loss from delivery settlement is added to realized P&L.

Types of Delivery Contracts

Weekly Contract: Settles every Friday at 16:00 (UTC+8).

In March 2023, Mr. Chen from Hangzhou opened a BTC weekly contract on Monday, March 6, which automatically settled on Friday, March 10 at 16:00, holding period of 4 days.

Next-Week Contract: Settles next Friday at 16:00 (UTC+8).

In June 2023, Ms. Liu from Guangzhou opened an ETH next-week contract on June 5, which settled on Friday, June 16 at 16:00, holding period of 11 days.

Quarterly Contract: Settles on the last Friday of each quarter at 16:00 (UTC+8).

In September 2023, Mr. Zhao from Chengdu opened a BTC quarterly contract on July 1, which settled on Friday, September 29 at 16:00, holding period of 90 days.

Delivery Price Calculation Method

Delivery Price = Arithmetic average of mark prices over the last hour

On Friday, October 27, 2023, Ms. Wu from Xi'an's BTC weekly contract settled:

15:00-15:01: Mark price $34,000
15:01-15:02: Mark price $34,100
...(60 one-minute prices in total)
15:59-16:00: Mark price $34,200
Delivery price: Average of 60 prices = $34,150

This arithmetic averaging method avoids price manipulation at the last moment.

Delivery Settlement vs Manual Closing Comparison

Closing Timing Comparison

Delivery Settlement: Fixed time automatic closing, no choice.

In November 2023, Mr. Zheng from Changsha's BTC weekly contract:

Friday 15:30: Market price $35,000 (best closing timing)
Friday 16:00: Delivery price $34,500 (passively accepted)
Missed $500/BTC best price

Manual Closing: Can choose any timing to close.

In December 2023, Mr. Huang from Chongqing's ETH weekly contract:

Thursday night: Market price $2,100 (actively closed)
Friday 16:00: Delivery price $2,050 (avoided unfavorable price)
Locked in additional $50/ETH profit early

Price Certainty Comparison

Delivery Settlement: Price is 1-hour average, relatively stable.

In January 2024, Ms. Lin from Tianjin's BTC weekly contract:

15:00-16:00: Market price fluctuated between $42,000-$43,000
Delivery price: $42,500 (average)
Avoided impact of extreme prices

Manual Closing: Price is instant market price, may fluctuate greatly.

In February 2024, Mr. Peng from Hefei's ETH weekly contract:

Manual closing: Market price $3,100
1 minute later: Market price $3,050 (fluctuated $50)
Instant price risk is higher

Fee Comparison

Delivery Settlement: Usually no delivery fee charged.

In March 2024, Ms. Zeng from Suzhou's BTC weekly contract settlement:

Contract value: $100,000
Delivery fee: $0
Saved transaction fees

Manual Closing: Need to pay trading fees.

If Ms. Zeng closed manually:

Contract value: $100,000
Fee rate: 0.05%
Fee: $50

Practical Applications of Delivery Settlement

Scenario 1: Short-term Arbitrage

In April 2024, Mr. Deng from Wuxi found BTC spot price $40,000, weekly contract price $40,500:

Buy spot: $40,000
Sell weekly contract: $40,500
Friday settlement: Profit $500/BTC (risk-free arbitrage)

Scenario 2: Long-term Holding

In May 2024, Mr. Gong from Changzhou was bullish on BTC long-term:

Open quarterly contract: $45,000
Settlement after 3 months: $55,000
Profit: $10,000/BTC

Quarterly contracts are suitable for long-term holding, reducing frequent operations.

Scenario 3: Rollover Operation

In June 2024, Ms. Yao from Yangzhou's BTC weekly contract about to expire:

Weekly contract: $50,000 (about to settle)
Next-week contract: $50,200 (new opening)
Rollover cost: $200/BTC

Continue holding through rollover, but need to bear rollover cost.

Scenario 4: Avoiding Liquidation

In July 2024, Mr. Yuan from Nantong's BTC weekly contract close to liquidation:

Current price: $48,000
Liquidation price: $47,500
Expected delivery price: $48,500

He chose to wait for delivery rather than manually close, avoiding liquidation risk.

Risk Management for Delivery Settlement

Strategy 1: Early Closing

If market price is favorable, manually close early to lock in profits.

In August 2024, Mr. Qin from Zhenjiang's BTC weekly contract:

Opening price: $50,000
Thursday price: $55,000 (+10%)
Decision: Close early to lock in $5,000 profit

Friday delivery price was $54,000, his decision was correct.

Strategy 2: Monitor Delivery Price Trend

Observe price movement in the last hour to predict delivery price.

In September 2024, Ms. Shi from Taizhou's ETH weekly contract:

15:00-15:30: Price uptrend
15:30-16:00: Price downtrend
Prediction: Delivery price may be unfavorable

She manually closed at 15:30, avoiding unfavorable delivery price.

Strategy 3: Choose Contract Period Reasonably

Choose appropriate contract based on holding period.

In October 2024, Mr. Tang from Yancheng:

Short-term trading (1-3 days): Weekly contract
Medium-term trading (1-2 weeks): Next-week contract
Long-term trading (1-3 months): Quarterly contract

Avoided frequent rollover costs.

Strategy 4: Set Reminders

Set reminders before delivery to avoid forgetting to close.

In November 2024, Ms. He from Lianyungang:

Friday 14:00: Phone reminder
Friday 15:00: Email reminder
Friday 15:30: SMS reminder

Ensures not missing best closing timing.

Common Mistakes in Delivery Settlement

Mistake 1: Forgetting Delivery Time

In December 2024, Mr. Wei from Huai'an forgot Friday was delivery day, position was automatically settled, missed Thursday's best closing price, losing $3,000.

Correct approach: Mark delivery dates in calendar, set multiple reminders.

Mistake 2: Opening Near Delivery

In January 2025, Mr. Wei from Suqian opened weekly contract at Friday 15:30, settled 30 minutes later, no time to respond to market changes.

Correct approach: Avoid opening on delivery day, at least 1 day in advance.

Mistake 3: Not Understanding Rollover Costs

In February 2025, Ms. Jiang from Xuzhou frequently rolled over weekly contracts, each rollover cost $200, accumulated $2,400 over 3 months. If she had opened quarterly contract directly, could have saved this cost.

Correct approach: Choose quarterly contract for long-term holding, reduce rollover frequency.

Mistake 4: Ignoring Liquidity Changes

In March 2025, Mr. Xie from Nanjing manually closed 1 hour before delivery, encountered decreased liquidity, slippage $500.

Correct approach: Close 2-3 hours early, avoid period with worst liquidity.

Factors Affecting Delivery Price

Factor 1: Market Trend

If market rises in the last hour, delivery price will be higher than price 1 hour ago.

In April 2024, BTC continued rising from 15:00-16:00:

15:00: $60,000
16:00: $61,000
Delivery price: $60,500 (average)

Longs profit more, shorts lose more.

Factor 2: Major News

If major news is released in the last hour, price may fluctuate dramatically.

In May 2024, Fed suddenly cut rates at 15:30:

15:00-15:30: BTC price $58,000
15:30-16:00: BTC price $62,000
Delivery price: $60,000 (average)

News caused delivery price to deviate significantly from 15:00 price.

Factor 3: Whale Manipulation

Although delivery price is 1-hour average, whales can still influence price through continuous trading.

In June 2024, a whale continuously bought from 15:00-16:00:

Pushed price up $1,000
Delivery price affected and rose
Whale's long position profited more

Factor 4: Market Sentiment

Near delivery, market sentiment may affect price movement.

In July 2024, market panic spread:

15:00-16:00: Large-scale closing
Price dropped $2,000
Delivery price lower than expected

Perpetual vs Delivery Contract Comparison

Expiry Time Comparison

Delivery Contract: Has fixed expiry date, must settle.

Perpetual Contract: No expiry date, can hold indefinitely.

In August 2024, Mr. Gong from Changzhou:

Delivery contract: Need to rollover or settle weekly
Perpetual contract: Can hold for months or even years

Funding Rate Comparison

Delivery Contract: No funding rate, but has rollover cost.

Perpetual Contract: Charges/pays funding rate every 8 hours.

In September 2024, Ms. Yao from Yangzhou:

Delivery contract rollover cost: $200/time
Perpetual contract funding rate: $50/day × 7 days = $350/week

Price Anchoring Comparison

Delivery Contract: Price anchored to spot through delivery.

Perpetual Contract: Price anchored to spot through funding rate.

In October 2024, Mr. Yuan from Nantong:

Delivery contract: Price must equal delivery price at expiry
Perpetual contract: Price may deviate from spot for long periods

FAQ

1. Is delivery time Beijing time?

Yes, delivery time is UTC+8 (Beijing time) 16:00. Users in other timezones need to note time difference.

2. Can I manually close a few minutes before delivery?

Yes, but liquidity may decrease near delivery, recommend closing 2-3 hours early.

3. Is delivery price favorable or unfavorable to me?

Depends on price movement in the last hour. If price moves in favorable direction, delivery price is favorable; otherwise unfavorable.

4. When do funds arrive after delivery?

P&L is immediately added to realized P&L after delivery, funds can be used immediately.

5. Can I open new position immediately after delivery?

Yes, can immediately open next-week or quarterly contract after delivery to achieve rollover.

6. Which is better, delivery or perpetual contract?

Depends on trading style. Short-term trading suits delivery contracts, long-term holding suits perpetual contracts.

Key Takeaways

Delivery contracts automatically close at fixed time, delivery price is arithmetic average of last hour
Delivery settlement has no fees, but cannot choose closing timing
Early closing can lock in profits, avoid unfavorable delivery price
Choose quarterly contract for long-term holding, reduce rollover costs
Set delivery reminders, avoid forgetting to close and missing best timing