Allowances
Definition of 'Allowances'A deviation from the basis grade or location allowable when delivering commodities under the terms of a futures contract. Allowances represent a premium or discount to the standards outlined in the futures agreement. |
|
Investopedia explains 'Allowances'Under a futures contract, the deliverables are standardized to a specific quality of good or delivery location. For example, an oil futures contract might require you to deliver 1,000 barrels of crude with an 850 kg/m³ density and 2% sulfur content. Allowances are made to these standards, since it might not be possible to find the specific good in a reasonable amount of time. For this example, an allowance may allow the seller to deliver within a range of 10 kg/m³ for density and 0.5% for sulfur. |
Related Definitions
Articles Of Interest
-
Getting Started In Foreign Exchange Futures
Learn how these futures are used for hedging and speculating, and how they are different from traditional futures. -
Fueling Futures In The Energy Market
The energy market influences every aspect of our lives, and these four options are its driving force. -
An Introduction To Managed Futures
Their inverse correlation with stocks and bonds make these alternative investments worth getting to know. -
Interpreting Volume For The Futures Market
Learn how to read the volume reports, look at the relation to liquidity and interpret volume using open interest. -
Trading The Soft Commodity Markets
Learn the contract specifications for a few of the most heavily traded commodities. -
Futures Fundamentals
For those who are new to futures but want a solid understanding of them, this tutorial explains what futures contracts are, how they work and why investors use them. -
Forex Tutorial: The Forex Market
In this online tutorial, beginners and experts alike can learn the ins and outs of the retail forex market. -
6 Asset Allocation Strategies That Work
Your portfolio's asset mix is a key factor in whether it's profitable. Find out how to get this delicate balance right. -
Nobel Winners Are Economic Prizes
Before you try to profit from their theories, you should learn about the creators themselves. -
Investing During Uncertainty
The inability to forecast future events can turn the markets upside down. Find out how to stay right-side up.
Free Annual Reports