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“Actuals” are physical products delivered after a contract is completed, different from futures contracts where “reals” are the underlying asset. Investors can sell actuals for a profit if the value of the commodity exceeds the purchase price.
Also known as cash products, “actuals” are physical products that are delivered after a contract is completed. This makes the product different from a futures contract, as reals are the product that serves as the underlying asset for a futures contract. The terms of that contract will determine the number of units that must be delivered by the expiration date mentioned in the terms.
While it can be somewhat confusing for investors just beginning to dabble in commodity trading, it sometimes helps to think of reals as the actual or real goods being traded using the futures contract as the means of managing the trade. This includes quantities of the product that must be delivered to the merchant at a specific point in the future. For example, if the investor enters into a futures contract that requires delivery of gasoline on a specific date in August, the seller must deliver the specific or actual quantity of gasoline specified in the contract for that date, charging the price per unit identified in the terms of the futures contract. Gasoline actually delivered on that date in August constitutes the actual data identified in the contract terms.
The concept of real data is important to this type of investment, as the investor not only locks in what is ideally a great price for commodities, but also a quantity of goods that can be sold at a profit once they become available. It is unusual for investors to arrange to sell their actual data just prior to the expiration of the futures contract, generally for a price per unit that is higher than the price paid to purchase the goods.
Actual data generally represents some form of physical merchandise, although some believe the term can also be applied to cash merchandise. When the futures deal is properly crafted and the investor has reason to believe that the value of the underlying commodity will exceed the purchase price stated in the contract, this approach can be extremely profitable. At the same time, the original seller typically sets a price for the actual data that at least covers their original investment in the commodity and allows for some form of profit for the company. Under the best of circumstances, both parties involved in that futures contract benefit from the deal.
Smart Asset.
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