Deliverable Grades
Updated on July 18, 2023
The term “deliverable grades” refer to the standard quality specifications outlined by the exchanges that must be met when delivering cash commodities against those contracts. These deliverable grades act as benchmarks for the acceptable quality of the commodities being traded.
Explaining deliverable grades using different concepts
Commodity Futures Contracts – Commodity futures contracts are agreements to buy or sell a specific quantity of a commodity at a predetermined price on a future date. These contracts are traded on exchanges, which establish rules and regulations for trading and delivery.
Standard Grades – Each exchange specifies standard grades for the commodities being traded. These standard grades define the quality characteristics and specifications that the delivered commodity must meet. These characteristics can include factors such as size, weight, purity, moisture content, color, or other attributes specific to the commodity.
Contract Grades – The term “contract grades” is often used interchangeably with deliverable grades. It refers to the standard grades of commodities listed in the exchange’s rules that must be met during the delivery process.
Delivering Cash Commodities – When a futures contract reaches its expiration or settlement date, the seller must deliver the underlying cash commodity specified in the contract to the buyer. The commodity delivered must meet the deliverable grades set by the exchange.
Contract Grades – The term “contract grades” is often used interchangeably with deliverable grades. It refers to the standard grades of commodities listed in the exchange’s rules that must be met during the delivery process.
