I am unable to understand how futures contract positions are closed. Can someone please explain in detail?
Closing a futures position is remarkably easy: if you started by selling a contract, you buy the same contract back. If you started by buying a contract, you sell it back. Since the contracts will be on the same underlying, the futures exchange just cancels out any requirement to sell (or buy) the underlying at all. Some people wonder, when trying to buy a contract back to cancel a position, whether there will be anyone in the market looking to do the opposite (i sell a contract). But there will be, because all the people that start out buying a contract, will now be looking to sell to cancel out their position. So plenty of sellers in the market. All you have to do is match up with one and you can buy, to cancel your position. Hope this helps.
