Underlying Commodity Law and Legal Definition

Underlying commodity refers to a cash commodity underlying a futures contract. It is the commodity or futures contract on which a commodity option is based, and which must be accepted or delivered if the option is exercised.

The following is an example of a case law referring to underlying commodity:

The underlying commodity of a futures contract is a specific good, governed by the terms of the futures contract. [Hershey v. Energy Transfer Ptnrs., L.P., 610 F.3d 239, 241 (5th Cir. Tex. 2010)].