Delivery Point Explained 2025: Key Locations & Costs in Futures Contracts

Daniel Rathburn is an editor at Investopedia specializing in tax, accounting, regulatory, and cryptocurrency topics.

What Is a Delivery Point in Futures Trading?

A delivery point refers to the specific location designated in a futures contract where the physical commodity is transferred from the seller to the buyer upon contract expiration. This concept is crucial for contracts involving physical delivery, while cash-settled contracts do not require this transfer.

Key Highlights

• The delivery point is the agreed-upon site where the underlying asset is physically handed over from the short position holder to the long position holder after contract maturity.
• Futures contracts specify standardized commodities to be delivered at one or more designated delivery points depending on geographic considerations.
• Transportation, storage, and handling costs associated with the delivery point influence the overall price of the futures contract.

Why Delivery Points Matter

Choosing the delivery point impacts the net cost and value of the commodity being delivered. Since transportation and storage expenses vary by location, the delivery point helps standardize pricing for futures contracts. This ensures clarity and fairness in contract execution.

Most futures traders engage in speculative trading and do not intend to take physical delivery of commodities like oil barrels or livestock. Those who do take delivery typically require significant infrastructure to store and manage the physical goods.

Buyers seeking physical delivery often use futures contracts to lock in prices for commodities essential to their production processes, mitigating risks from price volatility.

Examples of Common Delivery Points in 2024

Delivery points are usually major transport hubs or storage facilities for commodities. Price differences at these points are evident in markets such as gasoline, where prices fluctuate based on proximity to refining centers.

• Natural gas and liquefied natural gas (LNG) futures traded on the NYMEX deliver at Henry Hub, a key pipeline in Erath, Louisiana.
• Corn and soybean futures on the Chicago Board of Trade (CBOT) specify delivery to terminals along a 204-mile stretch of the Illinois River.
• Live cattle and hog futures require delivery at various livestock yards and slaughterhouses divided into five regional territories.
• West Texas Intermediate (WTI) crude oil futures on NYMEX deliver at the Cushing Hub in Oklahoma.

Important Considerations When Selecting a Delivery Point

Upon delivery, a warrant or bearer receipt representing a specific quantity and quality of the commodity at the delivery location is transferred from seller to buyer, triggering full payment. Buyers may opt to store the commodity at the delivery site, incurring storage fees. Additionally, exchanges impose various fees related to the delivery process.

Choosing the delivery point requires careful evaluation, as domestic and international locations carry different legal, tax, and regulatory implications. These factors can significantly affect the feasibility and cost-effectiveness of the contract.

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