Delivery Instrument

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.



comments powered by Disqus
Hot Definitions
  1. Odious Debt

    Money borrowed by one country from another country and then misappropriated by national rulers. A nation's debt becomes odious debt when government leaders use borrowed funds in ways that don't benefit or even oppress citizens. Some legal scholars argue that successor governments should not be held accountable for odious debt incurred by earlier regimes, but there is no consensus on how odious debt should actually be treated.
  2. Takeover

    A corporate action where an acquiring company makes a bid for an acquiree. If the target company is publicly traded, the acquiring company will make an offer for the outstanding shares.
  3. Harvest Strategy

    A strategy in which investment in a particular line of business is reduced or eliminated because the revenue brought in by additional investment would not warrant the expense. A harvest strategy is employed when a line of business is considered to be a cash cow, meaning that the brand is mature and is unlikely to grow if more investment is added.
  4. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will be executed at a specified price (or better) after a given stop price has been reached. Once the stop price is reached, the stop-limit order becomes a limit order to buy (or sell) at the limit price or better.
  5. Pareto Principle

    A principle, named after economist Vilfredo Pareto, that specifies an unequal relationship between inputs and outputs. The principle states that, for many phenomena, 20% of invested input is responsible for 80% of the results obtained. Put another way, 80% of consequences stem from 20% of the causes.
  6. Pareto Principle

    A principle, named after economist Vilfredo Pareto, that specifies an unequal relationship between inputs and outputs. The principle states that, for many phenomena, 20% of invested input is responsible for 80% of the results obtained. Put another way, 80% of consequences stem from 20% of the causes.
Trading Center