Cash Commodity

AAA

DEFINITION of 'Cash Commodity'

In futures trading, the cash commodity is delivered for payments. In certain contracts, a party is obligated to physically deliver the actual cash commodity, such as soybeans, oil, or treasury bills. Other contracts can be cash-settled, meaning that cash changes hand, rather than the physical commodity. In contrast to cash commodities, delivery on future contracts typically happens at a later date.

INVESTOPEDIA EXPLAINS 'Cash Commodity'

A simplified view is that the futures market is comprised of two groups: speculators and hedgers. Speculators are looking to make profits by betting on price changes and have no interest in taking possession of the underlying commodities. Hedgers are firms which either produce or require the underlying commodity. They are often interested in taking or making physical delivery of the underlying commodity, at a specified price. For example, an airline may hedge its operating costs by using a futures contract to lock in the price on future delivery of jet fuel.

RELATED TERMS
  1. Full Charge

    The event in which the price of a futures contract covers all ...
  2. Petty Cash

    A small fund of cash kept on hand for purchases or reimbursements ...
  3. Terminal Elevator

    A large pulley system, typically found at distribution centers, ...
  4. Pork Bellies

    A cut of pork that comes from the belly of a pig. Pork bellies ...
  5. Delivery Price

    The financial value of the conveyance of the underlying commodities ...
  6. Public Elevator

    A grain elevator that, for an associated fee, stores the bulk ...
Related Articles
  1. Getting Started In Foreign Exchange ...
    Forex Education

    Getting Started In Foreign Exchange ...

  2. An Introduction To Managed Futures
    Options & Futures

    An Introduction To Managed Futures

  3. Futures Fundamentals
    Insurance

    Futures Fundamentals

  4. Fannie Mae and Freddie Mac, Boon Or ...
    Insurance

    Fannie Mae and Freddie Mac, Boon Or ...

comments powered by Disqus
Hot Definitions
  1. Odious Debt

    Money borrowed by one country from another country and then misappropriated by national rulers. A nation's debt becomes odious ...
  2. Takeover

    A corporate action where an acquiring company makes a bid for an acquiree. If the target company is publicly traded, the ...
  3. Harvest Strategy

    A strategy in which investment in a particular line of business is reduced or eliminated because the revenue brought in by ...
  4. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  5. Pareto Principle

    A principle, named after economist Vilfredo Pareto, that specifies an unequal relationship between inputs and outputs. The ...
  6. Pareto Principle

    A principle, named after economist Vilfredo Pareto, that specifies an unequal relationship between inputs and outputs. The ...
Trading Center