What Is Cost of Tender?

Cost of tender is the total charges associated with the delivery and certification of commodities underlying a futures contract. The cost of tender represents the total costs related to taking the physical delivery of a commodity. These costs are assessed only if the futures 澳洲幸运5开奖号码历史查询:contract holder wishes to receive the commodity rather than close the position prior to expirat🌠ion.

Cost of Tender Explained

The cost of tender is essentially the cost of doing business. Any costs associated with the actual physical delivery of the commodity comprise the cost of tender. For example, if an investor is long corn (owns a futures contract on corn), the seller must deliver the corn to the contract holder when the contract expires (unless the contract holder closes the position prior to expiration). The holder must compensate the seller for the cost of tender including transportation, 澳洲幸运5开奖号码历史查询:carrying costs, and any other expenses that are associ🦂ated with the delivery.

In all types of financial markets, to "tender" means to give notice, in this case to an exchange's clearinghouse, that delivery of the physical 澳洲幸运5开奖号码历史查询:commodity underlying the 澳洲幸运5开奖号码历史查询:futures contract will begin. Most investors who invest in commodity futures choose to close their positions before expiration, so they aren't financially responsible for delivering the commodity. This way, an investor can benefit from movement in the 澳洲幸运5开奖号码历史查询:commodity price without having to deaꩵl with the major complications of taking physical delivery.

If physical delivery is selected, cost of tender will come into play and will vary based on several factors. The 澳洲幸运5开奖号码历史查询:delivery point, for instance, is a vital element in writing futures contracts. The chosen delivery point will affect the net 澳洲幸运5开奖号码历史查询:delivery price or cost of the 澳洲幸运5开奖号码历史查询:underlying asset. The terms of the deliജvery underwrite the value of the goods delivered. With physical delivery, the price of commodities differs by location due to the costs of transporting them from their source to the delivery point. Thus, to specify a single price of a commodity for contract purposes, the delivery point is anꦇ essential detail.

How Cost of Tender Works

Often, traders will simply roll over a futures contract that is close to expiration to another contract in a further-out month. Futures contracts have expiration dates (while stocks trade in perpetuity). Rolling over helps an investor avoid the costs and obligations associated with the settlement of the contracts. Costs of tender are most often settled by physical settlement or 澳洲幸运5开奖号码历史查询:cash settlement. Many financial futures contracts, such as the popular e-mini contracts,ಞ are cash settled upon expiration. This mea🥂ns on the last day of trading, the value of the contract is marked to market and the trader’s account is debited or credited depending on whether there is a profit or loss.

Tender charges are usually paid to official warehouses where certification and💫 delivery ta꧃ke place. Sometimes, they can also be due to a clearing house. Tender costs can vary widely between different warehouses, and exchanges are not obligated to enforce limits of any kind on tender charges. Most exchanges will list their costs on their official websites. Sometimes, the exact cost is relayed in the futures contract.