Spot Delivery Month
What Is the Spot Delivery Month?
In the commodities futures markets, the spot delivery month is the earliest conceivable month wherein the commodity underlying the futures contract will be deliverable. It is otherwise called the close by month or front month.
Something contrary to the spot delivery month is the back month, which alludes to the most recent month wherein the commodity can be delivered in light of current trading.
Figuring out the Spot Delivery Month
The commodities futures market is a large and important part of the modern financial markets. Through this marketplace, commercial customers who depend on commodities in their operations can productively source supplies and plan ahead for future months of production. Simultaneously, financial purchasers can utilize the commodities futures market to speculate on commodity prices or to take part in different activities, for example, risk hedging.
At the point when a trader purchases a commodities futures contract, they are assuming the obligation to receive a specific amount of the commodity in that contract's delivery month. Similarly, the seller of the contract assumes the obligation to deliver that commodity physically. As the delivery date approaches, futures traders who would really prefer not to receive or physically deliver the commodity can unwind their position by buying or selling offsetting positions. On the off chance that they don't do as such in time, they might be required to make or take delivery of the commodity.
The spot delivery month is the main month in any commodity futures market since it is utilized to decide the spot price of that commodity. Since the spot delivery month is the one closest to the present, it is the latest month according to the viewpoint of purchasers and sellers who wish to unwind their positions to try not to make or taking physical delivery. Consequently, commodities exchange regulators, for example, the Commodity Futures Trading Commission (CFTC) pay close regard for the trading activity in the spot delivery month, limiting trades to forestall exorbitant speculation or price distortions.
Real World Example of a Spot Delivery Month
To illustrate, consider the case of orange juice futures contracts. The delivery months for these contracts are in February, March, May, July, September, and November. Paradoxically, futures contracts for heating oil can be written to terminate at whatever long stretch of the year.
In this way, on account of an orange trader juice futures contract in January, the spot delivery month would be February. On account of heating oil futures, a trader who purchased their contract after the delivery date in November would have December as their spot delivery month.
Features
- Commodities regulators pay close regard for trading during spot delivery months, to keep away from inordinate speculation or price contortions.
- The spot delivery month is the next earliest month where a commodity futures contract is eligible for delivery.
- It is generally the most actively traded month for some random futures contract.
