Delivery Price

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DEFINITION of 'Delivery Price'

The financial value of the conveyance of the underlying commodities when a futures or forward contract expires. The delivery price is the price at which one party agrees to deliver the underlying commodity and at which the counterparty agrees to accept delivery. Delivery price can also refer to a stock's selling price in options contracts. Delivery prices are set by clearinghouses.

BREAKING DOWN 'Delivery Price'

In forward contracts, the forward price and the delivery price are identical when the contract begins, but as time passes, the forward price will fluctuate and the delivery price will remain constant. Also, underlying assets typically are not actually delivered, but rather closed out with offsetting contracts. Another possibility is that a delivery instrument representing the underlying asset, such as a warehouse receipt, will be transferred instead of the actual commodity. If the commodity is physically delivered, the cost of delivery will affect the contract's delivery price.

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RELATED FAQS
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    Traders roll over futures contracts to switch from the front month contract that is close to expiration to another contract ... Read Full Answer >>
  2. How does a forward contract differ from a call option?

    Forward contracts and call options are different financial instruments that allow two parties to purchase or sell assets ... Read Full Answer >>
  3. 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 >>
  4. 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 >>
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