Futures or
option contracts in which the
counterparties agree that instead of delivering the
underlying assets at the execution of the contract, one delivers their cash equivalent. For example, suppose someone bought a
call contract taking on the obligation to
buy a certain number of barrels of oil, should the option be exercised. If/when the option is exercised, the call holder pays the
strike price. In exchange, the counterparty delivers the
cash value of the agreed upon number of barrels of oil. Such a
transaction is usually
netted between the parties so that cash only changes hands once.