DEFINITION of 'Physical Delivery'

Term in an options or futures contract which requires the actual underlying asset to be delivered upon the specified delivery date, rather than being traded out with offsetting contracts.

BREAKING DOWN 'Physical Delivery'

Most derivatives are not actually exercised, but are traded out before their delivery date. However, physical delivery still occurs with some trades: it is most common with commodities, but can also occur with other financial instruments.

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RELATED FAQS
  1. What does it mean to take delivery of a derivative contract?

    Find out more about derivative contracts and what it means when the holders of derivative contracts take delivery of the ... Read Answer >>
  2. What's the difference between cash-on-delivery differ and delivery against payment?

    Find out more about cash on delivery and delivery versus payment transactions and the difference between these two types ... Read Answer >>
  3. How do I learn technical skills for trading commodities?

    Learn what resources are available to learn about trading commodities, and understand some of the differences between stocks ... Read Answer >>
  4. Why do futures' prices converge upon spot prices during the delivery month?

    It's a fairly safe bet that as the delivery month of a futures contract approaches, the future's price will generally inch ... Read Answer >>
  5. What is the difference between forward and futures contracts?

    Fundamentally, forward and futures contracts have the same function: both types of contracts allow people to buy or sell ... Read Answer >>
  6. What is a wild-card play?

    A wild-card play is a term related to futures contracts. A future is a financial contract obligating a buyer to purchase, ... Read Answer >>
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