DEFINITION of 'Deliverable Grades'

Deliverable grades, are the grades of a commodity that have been approved by a futures exchange as deliverable in the settlement of a futures contract. Also known as basis grades, they are used to standardize futures contracts. 

BREAKING DOWN 'Deliverable Grades'

Deliverable grades specify the minimum purity or quality of the commodity in the futures contract, ensuring both buyer and seller agree on precisely what is to be delivered - which is why they are also known as contract grades. 

Physical commodities often trade at a premium or discount to the standard futures contract price, depending on their quality and their location.

There are many different grades for every commodity, and they vary from exchange to exchange. For example, in the case of crude oil, different crude contracts trade on different exchanges.  Brent nd West Texas Intermediate have become international benchmarks. Brent is traded on ICE Futures Europe, while WTI contracts are sold chiefly on the New York Mercantile Exchange, or NYMEX

For more oil types, read Understanding Benchmark Oils.

  1. Basis Grade

    The Basis grade is the minimum acceptable standard required for ...
  2. Grading Certificate

    A grading certificate is an official document verifying that ...
  3. Contract Size

    Contract size is the deliverable quantity of commodities or financial ...
  4. Futures Contract

    An agreement to buy or sell the underlying commodity or asset ...
  5. Commodity

    A commodity is a basic good used in commerce that is interchangeable ...
  6. Approved Delivery Facility

    Approved delivery facility is a location authorized by an exchange ...
Related Articles
  1. Investing

    Investing in Crude Oil Futures: The Risks and Rewards

    Learn about the risks and rewards of trading oil futures contracts. Read about a few strategies to limit the risk in trading oil futures contracts.
  2. Trading

    The Difference Between Forwards and Futures

    Both forward and futures contracts allow investors to buy or sell an asset at a specific time and price.
  3. Trading

    An Introduction To Trading Forex Futures

    We explain what forex futures are, where they are traded, and the tools you need to successfully trade these derivatives.
  4. Trading

    Advantages Of Trading Futures Over Stocks (APPL)

    We look at the top eight advantages of trading futures over stocks.
  5. Investing

    What is a Forward Contract?

    A forward contract is a customized contract between two parties to buy or sell an asset at a specified price on a future date.
  6. Trading

    Futures and Options: How Are They Different?

    Options and futures may sound similar, but they are very different. Futures markets are a bit simpler to understand but carry a greater risk for investors.
  7. Managing Wealth

    Is Premium Fuel Worth The Cost?

    Find out if paying extra for higher-octane gasoline is worth the extra price at the pump.
  1. How are futures used to hedge a position?

    Futures contracts are one of the most common derivatives used to hedge risk. Learn how futures contracts can be used to limit ... Read Answer >>
  2. How can I calculate the notional value of a futures contract?

    Learn how the notional value of a futures contract is calculated, and how futures are different from stock since they have ... Read Answer >>
  3. How can electricity be traded as a commodity by an individual investor?

    Learn the characteristics unique to electricity trading as a commodity and how investors can trade electricity futures on ... Read Answer >>
  4. Why do companies enter into futures contracts?

    Learn how companies use futures contracts to hedge their exposure to price fluctuations as well as for speculation. Read Answer >>
  5. How do futures contracts roll over?

    Learn about why futures contracts are often rolled over into forward month contracts prior to expiration, and understand ... Read Answer >>
Trading Center