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. Backpricing

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

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

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

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

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

    A financial contract obligating the buyer to purchase an asset ...
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. Market Segmentation

    A marketing term referring to the aggregating of prospective buyers into groups (segments) that have common needs and will ...
  2. Effective Annual Interest Rate

    An investment's annual rate of interest when compounding occurs more often than once a year. Calculated as the following: ...
  3. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  4. Odious Debt

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

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

    A strategy in which investment in a particular line of business is reduced or eliminated because the revenue brought in by ...
Trading Center