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. Chicago Board Of Trade - CBOT

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

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

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

    A financial contract obligating the buyer to purchase an asset ...
  5. Futures Contract

    A contractual agreement, generally made on the trading floor ...
  6. Backpricing

    A pricing method used in specific futures contracts whereby the ...
Related Articles
  1. Options & Futures

    An Overview Of Commodities Trading

    Commodities markets, both historically and in modern times, have had tremendous economic impact on nations and people. Investing in commodities can quickly degenerate into gambling or speculation ...
  2. Active Trading

    Top 4 Mistakes That Cause Futures Traders To Fail

    Learn to keep your losses to a minimum and consistently produce positive results.
  3. Mutual Funds & ETFs

    Master Futures Trading With Trend-Following Indicators

    The futures market is a lot less scary when these indicators are used to establish current trends.
  4. Active Trading Fundamentals

    Sizing A Futures Trade Using Average True Range

    Futures trading is risky business, so it's crucial that traders' positions match the level of risk they are willing to bear.
  5. Active Trading

    Tips For Getting Into Futures Trading

    The futures markets can seem daunting, but these explanations and strategies will help you trade like a pro.
  6. Active Trading Fundamentals

    Where And How To Trade Energy Stocks

    Energy futures set a high bar to entry for individual traders and investors, redirecting exposure into sector equities and exchange-traded funds.
  7. Options & Futures

    Options and Roth IRAs: Do's and Don'ts

    A breakdown of the do's and don'ts of trading options in a Roth IRA.
  8. Options & Futures

    5 Secrets You Didn't Know About Roth IRAs

    Between its generous tax benefits at retirement and no required minimum distributions, a Roth IRA is well worth considering if you're eligible to have one.
  9. Forex Strategies

    The 10 Riskiest Investments

    Investors seeking high returns must also be prepared for high risk. Here are ten of the riskiest investments available.
  10. Options & Futures

    Trade Covered Calls On High Dividend Paying Stocks

    We explain the risks, rewards, timing, and profit and loss considerations for covered calls with dividend stocks.

You May Also Like

Hot Definitions
  1. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
  2. Asset Class

    A group of securities that exhibit similar characteristics, behave similarly in the marketplace, and are subject to the same ...
  3. Fiat Money

    Currency that a government has declared to be legal tender, but is not backed by a physical commodity. The value of fiat ...
  4. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
  5. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  6. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
Trading Center