What is a Warehouse Receipt?
A warehouse receipt is a piece of paper promising that a specific quantity and quality of a particularis in a given location.
How Does a Warehouse Receipt Work?
Let's say John Doe buys a coffee futures contract. On October 31, the contract expires and John is the proud owner of a huge amount of coffee. A giant truck does not pull up to John's house and dump Folgers on the front lawn. Instead, John receives a warehouse receipt detailing where the coffee is and that it is in the quantity specified.
If John wants his coffee or wants to sell his coffee, the warehouse receipt serve as proof that the coffee in the warehouse is his.