It is a story on the unanticipated delivery of a futures contract

1. The Unanticipated Delivery
of a Futures Contract
NISHU AGGARWAL
ARJUN BHALLA
ROHAN TYAGI
BBA+MBA (DUAL)- ASB

2. LET ME TELL YOU A STORY

3. CASE OF UNANTICIPATED
DELIVERY OF FUTURES
CONTRACT
This story is about a new employee of a financial
institution who had not previously worked in the
financial sector.
The duty of the employee was to handle the client.
It was noticed that the client enters regularly into a
long futures contract on live cattle for Hedging
Purposes.

4. Let me buy a
long position
contract
Let me close
my position

5. Mistake ?
The employee noted that the client was long one
position
The employee instructed the trader in the exchange to
buy(not sell) one contract as a result they ended up
with two live cattle futures contract.
By the time mistake was spotted trading in the
contract had ceased.

6. The F.I. started to look into
the details of the delivery
arrangements.
 Under the contract Cattles
would be delivered by the
party with short position to a
number of different locations
in the United States during
delivery.

7. The F.I. received the notice from the
exchange in which it was mentioned
that-
1. It would receive cattles on
Tuesday.
2. Location had cattle auction every
Tuesday
3. The distance was 2000 miles away.
Get me my
cattle's

8. The party with short position bought cattle at the
auction and delivers them immediately
Unfortunately the cattle cannot be resold until the next
auction on following Tuesday.
The employee was therefore faced with the problem
of making arrangements for the cattle to be housed and
fed for a week.

9. WHAT HAPPENED ?
• An additional Long Futures Contract was made
by mistake .
• If these cattle's have to be sold in the SPOT
MARKET then the client has to wait for 7 days
which involves maintenance of cattle’s.
• Or if the cattle’s were taken back to the client
place it involved a journey of (2000 Miles) which
have cost a lot of cost attached to it.

10. Solution.
• The new employee was sent
to the location to handle
things.
• The employee was
therefore faced with the
problem of making
arrangements for the cattle
to be housed and fed for a
week.