Ready delivery contract

Not every commodity deal is a futures contract settled weeks or months from now. Most trade in India still happens the old way: a buyer and seller agree a price, and the goods and the money change hands right there.

The workbook calls this a ready delivery contract. It is the spot market in its purest form — no waiting, no margin, no clearing corporation standing in between. Payment and delivery both happen immediately, which is exactly what "ready" means here.

Chapter 1 draws the line at one defining feature: immediacy. A ready delivery contract is the spot-market transaction where the transfer of ownership, and the payment for it, both happen at once — as against a futures or forward contract, where delivery and payment are deferred to a future date agreed today.

The workbook treats "spot market," "cash market," "physical market," "mandis" and "APMC" as the same thing for this purpose, and ready delivery is the transaction type that happens inside all of them. It can occur in a physical spot market, where buyers, sellers and licensed mandi traders meet in person, or in an electronic spot market, where the same immediate delivery-versus-payment principle applies over an electronic platform instead of a physical yard.

A wheat trader in a Madhya Pradesh mandi agrees to buy 50 quintals of wheat from a farmer at Rs 2,200 per quintal. The farmer's tractor is already at the mandi yard.

The trader pays Rs 1,10,000 in cash or by immediate bank transfer, and the farmer's wheat is weighed and handed over to the trader's godown the same day. Nothing is deferred — no margin is posted, no contract note is issued by an exchange, and no clearing corporation guarantees the trade. This is a ready delivery contract: the Rs 1,10,000 and the 50 quintals of wheat move at the same time, in the same transaction.

Chapter 1 (Introduction to Commodity Markets), section 1.2.1 ("Spot Market"), which introduces ready delivery as the defining feature of spot trading before the chapter moves on to forwards and futures. Expect a definitional question distinguishing a ready delivery (spot) contract from a forward or futures contract on the single point of timing.

• "Ready delivery" is about timing, not about the type of commodity or the size of the deal. Any spot transaction with immediate payment and delivery qualifies.
• Do not confuse a ready delivery contract with a forward contract "for ready delivery at a later date." A forward, by definition, defers delivery — the whole point of ready delivery is that it does not.
• Spot, cash, physical market, mandi and APMC all describe the same space in the workbook's usage; a question naming any of them is still asking about the spot market.