Table of Contents
Table of Contents

Current Delivery Definition

What Is Current Delivery?

In the commodity futures markets, “current delivery” refers to the futures contracts for which the physical delivery of the underlying commodities will occur in the current month.

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.

Key Takeaways

  • 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.
  • It may also be used to mitigate extreme volatility or for entities looking to shed all short-term risk.
  • Aside from their delivery date, current delivery futures are identical to that commodity’s other futures contracts.
  • Futures contracts will often have a variety of delivery dates, some of which may be current and some of which may not.

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.

Because of the use of leverage in futures trading, it is possible to sustain losses greater than the original amount of capital invested.

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 February 2023. In this commodity, contracts are being traded with delivery dates ranging between March 16, 2023 and April 25, 2023. Thus, for a trader looking at these lumber futures, the current delivery futures contract would be the same month in which it transactions (either of the months above). In theory, based on the information below, a trader could enter a futures contract on March 15 to anticipate delivery March 16.

Random Length Lumber Futures (Feb 2023)
Random Length Lumber Futures (Feb 2023).

What Is a Delivery Futures Contract?

A future delivery refers contract refers to a contract relating to a given financial instrument or commodity to be delivered at a future date. Although a futures contract may be entered into at any current point in time, the agreement may call for certain delivery of a good at a specified date yet to have passed.

How Do You Take Delivery of a Futures Contract?

A futures contract may warrant delivery and custody over a physical commodity or financial instrument. In many cases, especially for commodities, the futures contract holder may be issued a shipping certificate or warehouse receipt should they execute their contract and collect their asset. Only warehouses approved by futures exchange market can register and deliver these documents.

Do Futures Contracts Require Delivery?

No, the delivery point and delivery terms are outlined in the futures contract. In some situations, it may be agreed upon that physical delivery has been stipulated and mutually agreed upon. In other cases, the parties may agree the contract is speculative-only and does not require delivery. Last, futures contracts may also be exchanged or traded to parties willing to receive physical goods.

The Bottom Line

Current delivery refers to a futures contract that is entered into a very short amount of time. In this case, the party that has entered into the futures contract expects and desires delivery of the asset within the current month. Speculators may enter into the current delivery agreement if they fear very short-term but aggressive volatility or desire to mitigate all risk.

Article Sources
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  1. CME Group. "Random Length Lumber Futures - Calendar."

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