Delivery order
Family II · Orders
Not to be confused with limit order, sell limit order, pending order.
Delivery order is an instruction given to a broker to settle a derivatives or margin position by taking physical delivery of the underlying asset instead of closing it for cash. It applies mainly to futures and options that are physically settled, and it must be submitted before the broker's delivery deadline. Whether delivery is available and what that deadline is varies by broker, exchange and contract.
How a delivery order works
A delivery order changes the default settlement path. Most retail derivative positions are closed or rolled before expiry, so no asset changes hands. A delivery order tells the broker to let the contract run to settlement and to arrange transfer of the underlying asset into the client's account, or out of it for a short position.
The instruction is time-sensitive. Brokers set a cut-off, often several business days before the last trading day, after which they will close the position automatically. The exact cut-off and any delivery fees are set by the broker and the exchange, not by a single global rule.
Worked example
The buyer must have sufficient funds or margin to pay the full contract value plus the delivery fee. A short position would instead deliver the asset and receive the contract value, less fees.
Risks and constraints
- Funding: physical delivery requires the full contract value, not just margin, which can be far larger than the initial deposit.
- Storage and logistics: commodities may involve storage, insurance and transport costs that are not part of the futures price.
- Deadlines: missing the broker's delivery cut-off usually results in an automatic close-out, sometimes at an unfavourable price.
- Eligibility: some brokers or account types do not permit physical delivery at all, and rules differ by jurisdiction.
Often confused with
- limit order
- A limit order is an instruction to buy or sell at a specified price or better, not a request for physical settlement; the visible sign is that a limit order carries a price limit, while a delivery order carries a settlement instruction.
- sell limit order
- A sell limit order is a sell instruction with a minimum acceptable price, not a delivery instruction; the visible sign is that a sell limit order is used to exit a long position at a target price, while a delivery order is used to take or make physical delivery.
- pending order
- A pending order is any order that has been placed but not yet triggered or filled, not a settlement choice; the visible sign is that a pending order has a status of waiting, while a delivery order has a status of settlement instruction.