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Definition of 'Deliverable Grades'
The deliverable grade specifies the minimum quality of the commodity that is to be delivered under a contract. Carefully specifying the deliverable grade ensures that both parties to the contract agree on precisely what is to be delivered, allowing the contract to be priced correctly. For any given commodity, there are many different grade and types.
For example, oil comes in many different qualities, with much different prices for each grade. If a minimum deliverable grade is poorly specified, the deliverer can profit at the expense of the acquirer by delivering a cheaper, lower quality grade than was anticipated by the contract price.
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Investopedia explains 'Deliverable Grades'
In the futures market, firms often wish to hedge their risk to changing prices by entering contracts to buy certain commodities in advance. For example, suppose an airline wishes to hedge its risk to changes in future jet fuel prices. The airline could enter into a contract to buy a certain quantity of jet fuel, and have it delivered in the future. There are many different types of jet fuel, each with different prices, so such a contract would specify the minimum grade of fuel to be delivered. If a minimum deliverable grade is not specified, the deliverer would invariably deliver the cheapest fuel. In this situation, the airline might have overpaid considerably and it might receive jet fuel unsuitable for its purposes.
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Search results for 'Deliverable Grades'
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http://www.investopedia.com/university/commodities/commodities1.asp
... Contract Size, 10 metric tons. Deliverable Grades, The growth of any country
or clime, including new or yet unknown growths. Growths ...
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http://www.investopedia.com/university/commodities/commodities10.asp
... Deliverable Grades, Each futures contract shall be for 55% choice, 45% select, yield
grade 3 live steers, as defined by the United States Department of ...
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http://www.investopedia.com/university/commodities/commodities6.asp
... Deliverable Grades, Specific domestic crudes with 0.42% sulfur by weight or less,
not less than 37 degrees API gravity nor more than 42 degrees API gravity. ...
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http://www.investopedia.com/university/commodities/commodities8.asp
... Deliverable Grades, In fulfillment of each contract, the seller must deliver 100
troy ounces (±5%) of refined gold, assaying not less than .995 fineness, cast ...
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http://www.investopedia.com/university/commodities/commodities3.asp
... Deliverable Grades, Grade 1 electrolytic copper conforming to the specification
B115 as to chemical and physical requirements, as adopted by the American ...
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http://www.investopedia.com/university/commodities/commodities12.asp
... Contract Size, 10,000 million British thermal units. Deliverable Grades, Pipeline
specifications in effect at time of delivery. Contract Months, All months. ...
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http://www.investopedia.com/university/commodities/commodities9.asp
... Contract Size, 42,000 US gallons (1,000 barrels). Deliverable Grades, Generally
conforms to industry standards for fungible No. 2 heating oil. ...
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http://www.investopedia.com/university/commodities/commodities2.asp
... Deliverable Grades, Arabica Coffee: A Notice of Certification is issued based
on testing the grade of the beans and by cup testing for flavor. ...
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http://www.investopedia.com/university/commodities/commodities11.asp
... ft. of random lengths 2x4s (8' to 20'). Deliverable Grades, Each delivery unit shall
consist of nominal 2x4s of random lengths from eight feet to 20 feet. ...
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http://www.investopedia.com/university/commodities/commodities5.asp
... Contract Size, 50,000 pounds net weight. Deliverable Grades, Basic Grade: Strict
low middling quality and 1 2/32nd of an inch staple length. ...
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