What Is Current Delivery?
If no futures contracts provide delivery in the current month, then the term “current delivery” would refer to the contract that offers the nearest possible delivery date.
- A current delivery futures contract is one whose delivery is scheduled for either the current month or the earliest month available.
- It is commonly used by buyers of commodity futures looking for delivery as soon as possible.
- Aside from their delivery date, current delivery futures are identical to that commodity’s other futures contracts.
How Current Delivery Works
Commodity futures are an integral part of the modern financial markets. Through them, companies and traders can access a wide range of basic commodities for purposes such as industrial production, financial speculation, and risk hedging.
By centralizing orders through a common commodities exchange or clearinghouse, market participants can increase the speed and reliability of transactions while also decreasing counterparty risk. Current delivery commodity futures are one of the many types of futures traded today, focusing on contracts that are very close to receiving delivery of their underlying commodity.
For any given commodity, there will be several different futures contracts, each with its delivery scheduled on a particular month or date. Depending on the needs of the buyer, only certain delivery dates may be acceptable. For instance, a home builder who needs to source lumber to supply their next month’s building projects might need to ensure that their lumber is delivered no later than midway through the current month. In that scenario, the home builder might wish to look only at the current delivery lumber futures contracts in order to filter out the contracts too far in the future to meet their needs.
Current delivery futures are identical to the other months’ futures contracts, aside from their delivery date being in the current month. Apart from this difference, current delivery futures follow all the same parameters as the other futures contracts, such as the nature of the underlying commodity, its minimum quality level and allowances, and the procedures for trading it on the exchange.
Real-World Example of Current Delivery
The Chicago Mercantile Exchange (CME) is one of the world’s largest exchanges for commodity futures, facilitating trading in various futures including energy products, agricultural commodities, and building materials such as wood and steel.
To illustrate what current delivery looks like in practice, consider the case of the Random Length Lumber Futures contracts being traded as of January 2021. In this commodity, contracts are being traded with delivery dates ranging between January 19, 2021, and April 25, 2022. Thus, for a trader looking at these lumber futures, the current delivery futures contract would be the January 2021 contract.