Delivery Point

AAA

DEFINITION of 'Delivery Point'

In futures contracts, the delivery point is the place where the commodity will be delivered; the chosen location will have an effect on the net delivery price/cost. The price of commodities differs by location due to the costs of transporting them from their source to the delivery point. Thus, in order to specify a single price of a commodity for contract purposes, the delivery point is an essential detail.

INVESTOPEDIA EXPLAINS 'Delivery Point'

The delivery point is most often set at major transportation hubs for the commodity. These places are popular as a matter of convention. For example, Cushing, Oklahoma is a popular delivery point for oil contracts. Meanwhile, the Henry Hub in Erath, Louisiana is a popular delivery point for natural gas contracts.
The change in prices due to the delivery point is readily observable in gasoline prices. If you go on a road trip between cities, you will most often notice gradual changes in the average price of gasoline. Prices are lowest around major oil refining centers. Where gasoline must be delivered over a very long distance, prices will be considerably higher.

RELATED TERMS
  1. Futures

    A financial contract obligating the buyer to purchase an asset ...
  2. Backpricing

    A pricing method used in specific futures contracts whereby the ...
  3. Chicago Board Of Trade - CBOT

    A commodity exchange established in 1848 that today trades in ...
  4. Commodity

    1. A basic good used in commerce that is interchangeable with ...
  5. Futures Market

    An auction market in which participants buy and sell commodity/future ...
  6. Futures Contract

    A contractual agreement, generally made on the trading floor ...
Related Articles
  1. An Overview Of Commodities Trading
    Options & Futures

    An Overview Of Commodities Trading

  2. Top 4 Mistakes That Cause Futures Traders ...
    Active Trading

    Top 4 Mistakes That Cause Futures Traders ...

  3. Master Futures Trading With Trend-Following ...
    Mutual Funds & ETFs

    Master Futures Trading With Trend-Following ...

  4. Sizing A Futures Trade Using Average ...
    Active Trading Fundamentals

    Sizing A Futures Trade Using Average ...

comments powered by Disqus
Hot Definitions
  1. Last In, First Out - LIFO

    An asset-management and valuation method that assumes that assets produced or acquired last are the ones that are used, sold ...
  2. Ghosting

    An illegal practice whereby two or more market makers collectively attempt to influence and change the price of a stock. ...
  3. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  4. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  5. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  6. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
Trading Center