DEFINITION of 'Differential'

The amount of adjustment of the delivery location and grade of deliverables that a futures contract permits. Also known as "allowance. "

BREAKING DOWN 'Differential'

Some futures contracts allow the short position to adjust the location of the delivery and/or the grade of commodity being delivered. The permitted differentials are set in relation to a central location or the par basis grade.

  1. Basis Grade

    The minimum accepted standard that a deliverable commodity must ...
  2. Actuals

    The physical commodity that underlies a futures contract or is ...
  3. Approved Delivery Facility

    A facility authorized by an exchange to be used as a location ...
  4. Delivery Instrument

    A document given to the holder of a futures contact that may ...
  5. Certificated Stock

    The stock of a commodity that has been inspected by qualified ...
  6. Implied Volatility - IV

    The estimated volatility of a security's price.
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  2. Can mutual funds invest in commodities?

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  3. How do futures contracts roll over?

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

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