Commodity Future-indexed forward
Follow a commodity contract whose price remains linked to a selected Future until quantities are fixed.
How it works
The contract combines a physical commodity quote with a listed Future and an optional fixed basis. The unfixed portion retains exposure to their price difference. Recording a fixing transfers the chosen quantity into a new fixed-price forward, preserving the relationship with the original contract.
Key contract terms
- Purchase or sale and total physical quantity
- Compatible organization quote and selected listed Future
- Optional fixed basis per commodity unit
- Delivery period and payment date no later than Future expiry
- Fixing outcome: fixed-price forward, with or without Against Actual
Payoff: the contractual result
For a purchase, open value is remaining quantity × (physical quote − Future price − basis), discounted to payment. A sale reverses the sign. A fixing sets the generated forward's price to the accepted Future price plus basis.
A simple example
For a purchase of 100 tonnes, a physical quote of EUR 220, Future price of EUR 210 and basis of EUR 5 give EUR 500 before discounting. Fixing 40 tonnes at that Future price creates a 40-tonne forward at EUR 215; 60 tonnes remain unfixed.
Illustrative amounts exclude fees and currency conversion. A payoff is distinct from the instrument's value before maturity.
Lifecycle
- Contract created
- One or more fixings
- Remaining quantity tracked
- Zero remainder: source closed
What happens after a fixing?
Keep the unfixed remainder
A partial fixing reduces the open quantity. Another fixing can follow for all or part of the remainder.
Close the remainder
A full fixing closes the source. With a partial fixing, choosing to close the remainder also ends the source contract and adjusts its quantity.
Each fixing creates a fixed-price forward and, if selected, an Against Actual futures trade. These positions have their own lifecycle, even after the indexed source is closed.
- Create the indexed contract with the total physical quantity, selected future and optional basis.
- Record one or more price fixings. A partial fixing normally reduces the unfixed quantity, leaving a remainder available for another fixing.
- A fixing covering the remainder closes the source. During a partial fixing, choosing to close the remainder also ends the source contract and adjusts its current quantity.
- Each fixing generates a fixed-price forward for its fixed quantity and optionally an Against Actual futures trade. These positions continue their own lifecycle even when the indexed source has closed.
- Permitted corrections and cancellations preserve history and update linked outputs. The future's expiry alone does not replace recording a fixing or closing the remainder.
Using this instrument in OTCValue
Future expiry alone does not replace the fixing workflow or finalize the original position's P&L. References must share currency and unit; payment cannot precede delivery end. Against Actual quantities must match whole listed contracts exactly. Corrections remain subject to linked activity; recording does not execute a market order.