Investments, tenth edition

A

Money

Commodity

Long

Position

B

Money

Commodity

Money

Commodity

Long

Position

Clearinghouse

Short

Position

Short

Position

 Figure 22.3 

 Panel A,  Trading without a clearinghouse.  Panel B,  

Trading with a clearinghouse. 

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P A R T   V I

  Options, Futures, and Other Derivatives

wheat or corn on their front lawn. But the truth is that futures contracts rarely result in 

actual delivery of the underlying asset. Traders establish long or short positions in con-

tracts that will benefit from a rise or fall in the futures price and almost always close out, 

or reverse, those positions before the contract expires. The fraction of contracts that result 

in actual delivery is estimated to range from less than 1% to 3%, depending on the com-

modity and activity in the contract. In the unusual case of actual deliveries of commodities, 

they occur via regular channels of supply, most often warehouse receipts. 

 You can see the typical pattern of open interest in  Figure 22.1 . In the copper contract, 

for example, the January delivery contract is approaching maturity, and open interest is 

small; most contracts have been reversed already. The greatest open interest is in the March 

contract. For other contracts, for example, gold, for which the nearest maturity date isn’t 

until February, open interest is typically highest in the nearest contract.