When it comes to the end of the life of a forward or futures contracts, there are two options with regards to how that contract will settle. These are not choices at the end of the contract's life, but rather will be determined upfront at the inception of those contracts. The first way in which the contract could settle is that it will be physically delivered. This will require the short side of the contract to deliver the underlying asset and for the long side of the contract to pay the full forward or futures price for those assets. So if we had an equity forward contract with a forward price of $50, and the stock price was $60 on the delivery date, the long side of the contract would pay $50 to take delivery of assets worth 60, making for themselves a $10 gain. The short side of the contract would deliver those underlying shares worth 60, but only receive $50 for them, making a $10 loss. The alternative way in which a four-door futures contract could settle is through cash settlement. This does not require the short side of the contract to deliver the underlying asset and for the long side to pay for it using the forward or futures price, but rather for the loser from the contract to pay the amount that they've lost over to the winner of the contract. In our previous example, where the forward price was $50, and the underlying stock price at delivery was $60, the same outcome could be achieved by the short side of that contract paying $10 to the long side. The long side makes 10, the short side loses 10, and we are in exactly the same position as if the contract had been physically deliverable but without the two counterparties having to for the short side, deliver on the underlying asset, and for the long side to pay the full forward or futures price.