Commodity Warrant

A warrant that gives the holder the right to receive a fixed quantity of a certain commodity (such as wheat, rice, gold, silver, oil, etc) at a fixed price. Such warrants are issued by the producers of commodities or by financial intermediaries. Commodity warrant can be settled either through cash settlement or physical delivery. Cash settled warrants entail the holder to receive a cash amount representing the price of underlying commodity on the maturity date. Otherwise, physical delivery takes place.