FREE Guide - 5 Chart Patterns You Need to Know!

Convenience Yield

What does Convenience Yield mean?

The additional advantage that an investor may derive from holding the commodity rather than a futures position in the same underlying asset. This is applicable for consumption asset. Holders of a consumption asset may obtain some benefits from physically holding the asset as inventory. It ensures continuity in production process or may generate profit from temporary shortages before maturity date of equivalent futures contract.

Futures Knowledge Explains Convenience Yield

The benefit of convenience yield is associated with physically owning a commodity, rather than owning a futures contract for that particular commodity. For example, oil, a consumption asset, has a convenience yield because the holder of the oil inventory can sell at higher prices during shortages. However, the convenience yield cannot be calculated directly and has only an implied value and depends on the probability of future events.

Get Your FREE Technical Analysis Guide!
Timing is everything, and with this guide, you'll learn how technical analysis can help find the right time to enter and exit your futures trades. Nearly 30 explanations and examples of the most popular technical analysis tools are all in this one handy guide. It's like having a futures trading mentor at your side!