Delivery Instrument

AAA

DEFINITION of 'Delivery Instrument'

A document given to the holder of a futures contact that may be exchanged for the underlying asset when the future contract expires. In simple terms, a delivery instrument is a receipt. Because many futures contracts involve produce and other items of bulk, delivery instruments are generally preferred to the actual asset.

INVESTOPEDIA EXPLAINS 'Delivery Instrument'

In addition to the problems associated with shipping bulk items, delivery instruments can also save money for the parties involved. This is because many futures contacts are sold before they expire. Of course, if the seller also possessed the underlying assets, he or she would need to make arrangements to ship them to the new buyer, costing the shipper money that could have been saved had the assets not been physically held in the first place.


Delivery instruments can include warehouse receipts, shipping certificates and vault receipts. These all are more transferable than physical commodities and provide investors with a more efficient method of settlement.

RELATED TERMS
  1. Delivery Risk

    The risk that a counterparty in a transaction may not be able ...
  2. Cash Settlement

    A settlement method used in certain future and option contracts ...
  3. Assignable Contract

    A futures contract with a provision permitting the contract holder ...
  4. Approved Delivery Facility

    A facility authorized by an exchange to be used as a location ...
  5. Expiration Date (Derivatives)

    The last day that an options or futures contract is valid. When ...
  6. Certificated Stock

    The stock of a commodity that has been inspected by qualified ...
RELATED FAQS
  1. How do futures contracts roll over?

    Traders roll over futures contracts to switch from the front month contract that is close to expiration to another contract ... Read Full Answer >>
  2. Why do companies enter into futures contracts?

    Different types of companies may enter into futures contracts for different purposes. The most common reason is to hedge ... Read Full Answer >>
  3. What does a futures contract cost?

    The value of a futures contract is derived from the cash value of the underlying asset. While a futures contract may have ... Read Full Answer >>
  4. What are the main risks associated with trading derivatives?

    The primary risks associated with trading derivatives are market, counterparty, liquidity and interconnection risks. Derivatives ... Read Full Answer >>
  5. How can an investor profit from a fall in the utilities sector?

    The utilities sector exhibits a high degree of stability compared to the broader market. This makes it best-suited for buy-and-hold ... Read Full Answer >>
  6. How can electricity be traded as a commodity by an individual investor?

    Electricity can be traded in the financial marketplace like any other commodity. Electricity futures trading offers an alternative ... Read Full Answer >>
Related Articles
  1. Forex Education

    Getting Started In Foreign Exchange Futures

    Learn how these futures are used for hedging and speculating, and how they are different from traditional futures.
  2. Options & Futures

    Interpreting Volume For The Futures Market

    Learn how to read the volume reports, look at the relation to liquidity and interpret volume using open interest.
  3. Options & Futures

    Options On Futures: A World Of Potential Profit

    There's one simple hurdle in the transition from stock to futures options: learning about product specifications.
  4. Insurance

    Futures Fundamentals

    For those who are new to futures but want a solid understanding of them, this tutorial explains what futures contracts are, how they work and why investors use them.
  5. Investing Basics

    Understanding Total Return Swaps

    A total return swap is a contract in which a payer and receiver exchange the credit risk and market risk of an underlying asset.
  6. Investing Basics

    Explaining Absolute Return

    Absolute return refers to an asset’s total return over a set period of time. It’s usually applied to stocks, mutual funds or hedge funds.
  7. Economics

    Why The Dollar’s Strength Can Continue

    Overall, the U.S. dollar has rallied this year, with the Dollar Index (DXY) now up by roughly 8 percent year-to-date, but the gain hasn’t been steady.
  8. Economics

    The Story Behind Gold's Mini-Flash Crash

    The gold market was rocked last week by a sudden drop in prices. There are a number of factors that can lead to a flash crash in any market.
  9. Investing

    4 Structured Product Types Wealthy Clients Love

    High-net-worth investors find structured products appealing for a variety of reasons. Here's a look at four types.
  10. Investing

    Is It Time To Buy Commodities?

    Despite the news, the Athens Stock Exchange is down less than 5 percent year-to-date, while the Shanghai Composite remains up more than 10 percent.

You May Also Like

Hot Definitions
  1. Bogey

    A buzzword that refers to a benchmark used to evaluate a fund's performance. The benchmark is an index that reflects the ...
  2. Xetra

    An all-electronic trading system based in Frankfurt, Germany. Launched in 1997 and operated by the Deutsche Börse, the Xetra ...
  3. Nuncupative Will

    A verbal will that must have two witnesses and can only deal with the distribution of personal property. A nuncupative will ...
  4. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
  5. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
  6. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!