DEFINITION of 'Delivery Month'

Delivery month is key characteristic of a futures contract that designates when the contract expires and when the underlying asset must be delivered or settled. The exchange on the futures contract is traded will also establish a delivery location and a date within the delivery month when the delivery can take place. Not all futures contracts require physical delivery of a commodity, and many are settled in cash. The delivery month is also referred to as the contract month.

BREAKING DOWN 'Delivery Month'

 

Delivery month is simply the month stipulated in the contract for cash settlement or physical delivery. Some commodities can be delivered in any month. Others are only delivered in certain months. If a futures trader is looking to offset or liquidate a position, the delivery months must match or the trader ends up long one month and short a different month rather than canceling out the position. Most futures positions are excited prior to the delivery month, so the contracts nearing delivery often see the most volume and set the current price of the underlying commodity.

How Delivery Months Are Coded

On the ticker, delivery month is indicated by a letter. The list below shows the letter next to the month. Although letters are omitted, the coding system runs in alphabetical order with Z corresponding with December.

  • January: F
  • February: G
  • March: H
  • April: J
  • May: K
  • June: M
  • July: N
  • August: Q
  • September: U
  • October: V
  • November: X
  • December: Z

For example, cocoa can only have a delivery month of March, May, July, September or December, while copper can be delivered year round. The complete ticker symbol for a futures contract will describe the commodity as a two character code, the delivery month as a single letter and the year as a two digit number. CCZ18, for instance, indicates a cocoa contract for delivery in December 2018.

Why Do Delivery Months Skip Letters?

There are differing theories on the why of the numbers assigned to different delivery months. While the month letter codes are simply a tradition, the prevailing opinion is that letters that represent actions like bid (B) and ask (A) were removed as well as letters easily confused when spoken like C, D and E. Add in the removal of I and L, which can be easily mistaken when written, and you are more or less at the current list. The true story doesn't really matter as long as traders and the people in the pit know what delivery month they are talking about.

RELATED TERMS
  1. Delivery Date

    A delivery date is the final date by which the underlying commodity ...
  2. Delivery Price

    The delivery price is the price at which one party agrees to ...
  3. Spot Delivery Month

    The spot delivery month, also known as nearby month or front ...
  4. On Track

    On track is a commodity futures delivery deferred and priced ...
  5. Delivery Notice

    A delivery notice is part of a futures contract that defines ...
  6. In Sight

    In sight commodities are those held for delivery at a storage ...
Related Articles
  1. Investing

    Commodity Investing 101

    From the orange juice we drink to the gas we use to power our vehicles and heat our homes, commodities play important roles in our daily lives.
  2. Investing

    New App Makes Amazon the Uber of Shipping (AMZN, UPS)

    Amazon's new shipping app strengthens its position as a logistics and delivery powerhouse.
  3. Investing

    Currency Futures: An Introduction

    Find out why forex market is not the only way for investors and traders to participate in foreign exchange.
  4. Investing

    Trading The Soft Commodity Markets

    Learn the contract specifications for a few of the most heavily traded commodities.
  5. Investing

    A Quick Guide for Futures Quotes

    Here is a quick guide for reading and understanding futures markets quotes.
  6. Trading

    Futures Fundamentals

    This tutorial explains what futures contracts are, how they work and why investors use them.
RELATED FAQS
  1. 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 >>
  2. 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 >>
  3. Why do futures' prices converge upon spot prices during the delivery month?

    Learn why as the delivery month of a futures contract approaches, the future's spot price will generally inch toward or even ... Read Answer >>
  4. What's the difference between a bank guarantee and a letter of credit?

    Letters of credit ensure that a transaction proceeds as planned, while bank guarantees reduce the loss if the transaction ... Read Answer >>
Trading Center