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Notice of Intent to Deliver

Notice of Intent to Deliver

Notice of Intent to Deliver

When
Notice of Intent to Deliver

When an exchange is developing a new futures contract it must specify the details of the agreement between the two parties. The exchange must specify the asset, the contract size (the amount of the asset that has to be delivered), the delivery location (the place where the delivery can be made), and the delivery period (the times when delivery can be made).

For many futures contracts the delivery period is a whole month. Sometimes, there are also some alternatives for the quality of the asset and/ or for the delivery location. When alternative qualities, delivery periods, or locations are possible, it is generally the party with the short position (the party that has agreed to sell the asset) that chooses among these alternatives.

When the holder of the short position of the futures contract decides to deliver, he/she must present a notice of intent to deliver to the exchange prior to the delivery, which states how many contracts will be delivered and specifies the grade of the asset and the place of delivery. The exchange then assigns the notice and the subsequent delivery to one holder of a long position of the futures contract.


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