From Traderpedia

Literally means "interchangeable in trade."

The term is often used to apply to financial instruments which are indentical in specifications, for example 5x E-mini S&P futures contracts are fungible/offsettable against one full size S&P futures contract

If you were long one full size S&P futures contract, you could sell 5x emini S&P futures contracts in the same account to go flat. Emini's are fully fungible against the full size counterpart.