DEFINITION of 'Cost Of Tender'

The total charges associated with the delivery and certification of commodities underlying a futures contract. The cost of tender represents the total costs related to taking physical delivery of a commodity. These costs are assessed only if the futures contract holder wishes to receive the commodity rather than close the position prior to expiration.

BREAKING DOWN 'Cost Of Tender'

The cost of tender is essentially the cost of doing business. Any costs associated with the actual physical delivery of the commodity comprise the cost of tender. For example, if an investor is long corn (owns a futures contract on corn), the seller must deliver the corn to the contract holder when the contract expires (unless the contract holder closes the position prior to expiration). The holder must compensate the seller for the cost of tender, including transportation, carrying costs and any other expenses that are associated with the delivery.

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