[simonh]

There are contracts that specify physical delivery, but they also specify the warehouse or storage facility the commodity will be delivered to. The buyer can either collect the commodity or pay the storage facility to hold it for them. It's not likely it would be delivered to someone's house unexpectedly, because someone would need to pay for the additional cost of transportation.

[wpietri]

Yeah, the way the story was told the thought they could save some money and the hassle of making a deal with a warehouse. Why pay for something they're never going to use? So they agreed to pay for transportation in the event of delivery, thinking they'd never get charged for it. But I could well believe this was a trader urban legend.

[quickthrowman]

A source to back you up, this is precisely how it works. The CME link goes into more detail on how physical delivery works for base metals.

Other physically settled commodity contract have different delivery locations, /CL (WTI crude) delivery takes place at a terminal and storage facility in Cushing, OK.

https://www.cmegroup.com/education/courses/introduction-to-b...

[beerandt]

Oil and gas also have the benefit of published prices for most pipeline transport, although you still need a buyer/terminal that's physically connected to the network to take delivery.