Worked scenario
Quoted on Monday's rate, delivered at Thursday's cost
In a trade where the input is a traded commodity, an open quotation is a free option written by the supplier.
3 min read
Metal prices move continuously. A quotation issued today and accepted in three weeks is priced on stale information.
Validity has to bite
Most quotations state a validity that nobody enforces, because refusing an order over a lapsed date feels commercially aggressive. Enforced consistently and stated clearly, it is simply how the trade works.
Aggregate exposure
The risk is not one quotation; it is the total value of open quotations at old rates when the market moves. Stockists rarely know that number and it is straightforward to produce.
What changes
- Quotation validity stated and enforced
- Rate basis recorded with each quotation
- Margin at current cost visible before confirmation
- Exposure from open quotations known in aggregate
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