How Does the Existence of Delivery Options Affect the Convergence of Prices?

The existence of delivery options, such as the short party's right to choose the specific delivery day or location, can slightly complicate convergence. These options hold a small monetary value for the short seller.

Consequently, the futures price may not converge exactly to the spot price but to the spot price plus the value of the delivery option, known as the "cheapest-to-deliver" option. This subtle difference is usually small but relevant for precise arbitrage.