Delivery Trading - Definition & Advantages of Delivery Trading

What is Delivery Trading? 

Delivery trading involves buying and selling shares with an intention to hold for a specified date. This method allows traders to physically own the shares for selling later or holding for long. 

Types of Delivery Trading 

Delivery trading varies with the asset being traded, trade delivery date, and contract terms. The common types include: 

Spot delivery: Mostly used for quick trading of assets like currencies, commodities, or shares within two days. 

Forward delivery: Similar to spot trades, but with a future delivery agreement, it is ideal for hedging against potential asset price movements. 

Advantages of Delivery Trading 

Delivery trading benefits include: 

Reduced counterparty risk: Delivery trading eliminates counterparty risk as both parties fulfil their obligations. 

Increased flexibility: It allows customization to meet the involved parties' needs, making it more flexible than other trading types. 

Lower costs: It often involves lower costs than other trading types as it eliminates commission or exchange fees. 

Greater transparency: Delivery trades occur between two known parties, providing more transparency than other trades. 

Conclusion 

Delivery trading is an effective investment method in the stock market without worrying about short-term fluctuations. It allows for long-term holding of stocks with potential for high returns. It's also convenient as it doesn’t require constant monitoring. This trading method could be ideal for a hands-off investment approach.