What Is Current Delivery?
Current delivery, sometimes referred to as "current delivery month" or "spot month," is a specific type of futures contract that requires the delivery of the underlying commodity in the current month. Current delivery can also mean the earliest possible month before other futures contracts of the same commodity are due.
- Current delivery is a specific type of futures contract that requires the delivery of the underlying commodity in the current month.
- Current delivery can also refer to the earliest possible or upcoming settlement date even if it's in the next month.
- Current delivery is helpful to both the buyer and seller of a futures contract because it provides time to make payment and delivery arrangements.
Understanding Current Delivery
Current delivery is one of several classes of futures contracts delivering the same underlying asset or commodity but defined by the month they're delivered. A contract described as "current delivery" is one with the nearest delivery. A futures contract is an agreement to buy or sell a commodity, security, or asset at a preset price with delivery due following the contract’s expiration date.
The settlement date for the contract is when the physical delivery of the commodity occurs. In some cases, an offsetting contract is entered into so that no physical delivery is made. Instead, the offsetting contract creates a gain or loss from the difference between the buy and sale prices. Futures contracts come in standardized amounts and quantities and trade on a futures exchange. The contracts can also settle in specific months throughout the year.
A contract with a current delivery usually means that the settlement date is due later in the current month. Current delivery can also refer to the futures contract with the nearest or closest settlement date. For example, if the nearest contract is due next month, it might also be considered current delivery. In other words, current delivery means the contract's settlement will take place shortly.
Benefits of Current Delivery
Current delivery is helpful to both the buyer and seller of a futures contract because it provides the settlement date and when the physical commodity needs to be delivered. If physical delivery is to occur, the seller needs to make arrangements well before the current delivery date. For example, the seller might need time to arrange shipment of the commodity, so that the buyer receives it in time. On the other hand, the buyer would need to make arrangements for payment. Current delivery helps the buyer plan their monthly cash flow and budget for the upcoming payment.
It's important to note that the specified period during which the futures contract must be fulfilled can vary, depending on the needs of the deal's participants. For some futures, the delivery period is the whole month, for others, it's a specific date. In other words, delivery of a futures contract can vary depending on its terms. Even though the contract has a current delivery date, some futures allowed for early settlement. The two parties involved in the contract would have to decide whether early settlement is advantageous for them, given the current market conditions at that time.
Example of Current Delivery
The Chicago Mercantile Exchange (CME) is an exchange that trades futures contracts. The CME group contains multiple exchanges and facilitates trades for brokers and dealers. The CME Group lists various commodities and their futures contracts on its website. For example, natural gas futures are based on the prices and delivery from the Henry Hub in Louisiana, United States.
Below are the upcoming contracts for natural gas futures as of September 25, 2020.
- The current delivery for natural gas futures is the October 2020 contract.
- Commodities can have varied expiration dates leading up to the current delivery month, depending on the type of commodity and holidays.
|Natural Gas Futures Contracts|
|OCT 20||JAN 21|
|NOV 20||FEB 21|
|DEC 20||MAR 21|
CME Group. "Henry Hub Natural Gas Futures Settlements." Accessed Sept. 27, 2020.