Delivery Price
What It Is:
Delivery price is the price at which the underlying commodity of a futures contract settles upon expiration of the contract.
How It Works/Example:
Upon the expiration of a futures contract, the underlying commodity is delivered to the holder in return for a predetermined price -- the delivery price. Delivery price is set by the clearinghouse at which the futures contract settles.
For example, if a soybean futures contract settles at a given clearinghouse, and the clearinghouse sets a price of $100 for the associated quantity of soybeans, $100 is the delivery price.
Why It Matters:
Delivery price is locked in by the clearinghouse upon contract settlement in order to avoid exposure in the spot market for the underlying commodity.
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Cached on May 22, 2012, 9:49 am