When do futures settle

A good example of seasonal expiry comes in the form of grain and oilseed futures. The CME provides participants with a variety of products designed to aid in the pursuit of almost any financial goal. However, from year to year, the schedules are similar. So if you look at the futures expiration calendar , , , or , there will be many like entries. Here are answers to several of the most common:. Successful futures traders understand the importance of continuous education and improvement.

To learn more about how futures contracts expiration can influence your trading and other technical aspects of futures contracts, download our free e-book Technical Analysis for Beginners. It will help you make more informed decisions as you start trading futures. Established by renowned commodity trader Andy Daniels in , Daniels Trading was built on a culture of trust committed to a mission of Independence, Objectivity and Reliability.

The StoneX Group Inc. StoneX Financial Inc. SFI is registered with the U. Trading swaps and over-the-counter derivatives, exchange-traded derivatives and options and securities involves substantial risk and is not suitable for all investors. The information herein is not a recommendation to trade nor investment research or an offer to buy or sell any derivative or security. It does not take into account your particular investment objectives, financial situation or needs and does not create a binding obligation on any of the StoneX group of companies to enter into any transaction with you.

You are advised to perform an independent investigation of any transaction to determine whether any transaction is suitable for you. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of StoneX Group Inc. Skip to primary navigation Skip to main content Skip to footer A futures contract is a legally binding, perishable security.

When the CME contract expiration dates for most commodities pass, physical delivery commences. Financial settlement is a common way of closing out a futures contract that faces currencies or the equities indices. Monthly Contracts that expire on a monthly basis offer 12 unique listings for each calendar year.

The contract is usually closed for cash, and the investor simultaneously enters into the same futures contract trade with a later expiry date. Non-financial commodities such as grains, livestock and precious metals most often use physical settlement. Upon expiration of the futures contract , the clearinghouse matches the holder of a long contract against the holder of a short position.

The short position delivers the underlying asset to the long position. The holder of the long position must place the entire value of the contract with the clearinghouse to take delivery of the asset. This is quite costly. In addition, there are delivery and storage expenses.

Thus, most traders want to avoid physical delivery and roll their positions prior to expiration to avoid it. Many financial futures contracts, such as the popular E-mini contracts, are cash settled upon expiration.

Large traders usually roll their positions prior to expiration to maintain the same exposure to the market. Some traders may attempt to profit from pricing anomalies during these rollover periods. Financial Futures Trading. Your Privacy Rights. To change or withdraw your consent choices for Investopedia. At any time, you can update your settings through the "EU Privacy" link at the bottom of any page. These choices will be signaled globally to our partners and will not affect browsing data. We and our partners process data to: Actively scan device characteristics for identification.

I Accept Show Purposes. Your Money. Personal Finance. Your Practice. Popular Courses. Apply market research to generate audience insights. Measure content performance. Develop and improve products. List of Partners vendors. The last trading day is the final day that a futures contract , or other derivatives with an expiry date, may trade or be closed out before the delivery of the underlying asset or cash settlement must occur.

At the end of the last trading day, the contract holder must be prepared to accept delivery of the commodity or settle in cash if the position is not closed. The same concept applies to options contracts. The last trading day is the final chance to close the position, otherwise the underlying will be delivered if applicable.

If the option is worthless, then it does not need to be closed, it will simply expire. The last trading day is the day before a derivative expires. On the expiry date, the derivative is no longer tradable and the settlement process begins.

Assume the expiration date on an options contract is Friday, March The last trading is Thursday, March The last trading day is the final day that a futures contract can be traded or closed out. Any contracts outstanding at the end of the last day trading day must be settled by delivery of the underlying physical asset, exchange of financial instruments, or by agreeing to a monetary settlement.

The specific agreements covering these potential outcomes are contained in the futures contract specifications and vary between securities. In general, most futures contracts result in an exchange of financial instruments or a cash settlement rather than a delivery of the physical commodity since most market participants are hedging or speculating.

The last trading day for an option is the day before the expiration date. Holders of options on the expiry date will be required to deliver or receive the underlying, if applicable. Options that are worthless will expire and don't need to be closed out. The option seller will need to provide those shares. For some derivative contracts, trading is allowed on the expiry date up to a certain time of day. In this case, the last trading day is the expiry day.

Traders can find expiry dates in their derivative contract or by looking at various exchange websites for standard trade settlement details. Exchanges will have a web page that lists all of their futures and options contracts and their settlement dates and times. Some popular futures and options exchanges in North America include:.

The last trading day is important for investors to note as it allows them to close out of the contract before expiration.

Futures contracts also have several notice days which provide the investor with details on the approaching settlement.