Fungible

Fungibility

The state of being interchangeable. For example, money has fungibility because there is no difference between one dollar and another dollar. Likewise, stocks of the same type in the same company and commodities of the same quality are generally fungible. On the other hand, assets like land or baseball cards are not fungible because each unit has unique qualities that add or subtract value.

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fungible

Of or relating to assets that are identical in quality and are interchangeable. Commodities, options, and securities are fungible assets. For example, an investor's shares of Xerox left in custody at a brokerage firm are freely mixed with other customers' Xerox shares. Likewise, stock options are freely interchangeable among investors, and wheat stored in a grain elevator is not specifically identified as to its ownership.

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Fungible. When two or more things are inter-changeable, can be substituted for each other, or are of equal value, they are described as fungible.

For example, shares of common stock issued by the same company are fungible at any point in time since they have the same value no matter who owns them.

Forms of money, such as dollar bills or euros, are fungible since each can be exchanged or substituted for another of the same currency.

Similarly, put and call futures contracts on the same commodity that expire on the same date are fungible since a contract to buy -- a call -- can offset, or neutralize, a futures contract to sell -- a put.

On the other hand, multiple classes of the same stock may not be fungible. For example, in some markets citizens of the country are eligible to buy one class of stock and noncitizens a different class. Typically, the shares have different prices and may not be exchanged for each other.