Futures Roll

Futures contracts have an expiration date, unlike stocks. To maintain a position, you might need to roll it, which involves closing the current position in the expiring month and opening a new one in the next month. This incurs additional costs. Here’s why rolling a position is crucial when trading certain futures products.

Futures contracts expire, and their expiration cycles can be monthly or quarterly, depending on the product. The expiration date is the last day a contract can be traded. Different products follow different expiration cycles, so it’s essential to know the specific cycle of the product you’re trading.

As the expiration date approaches, you have three options to manage your positions:

1.

Close out the position

2.

Let the contract expire (if cash settled)

3.

Roll the position*

Your decision will depend on whether the contract is financially or physically settled and the associated costs.

Physically settled products must be closed on many brokerages, as they do not allow for physical delivery. Pay close attention to these dates:

First Notice Day

The first day the exchange can assign delivery to accounts that are long futures contracts.

Last Trading Day

The last day a futures contract may trade or be closed before delivery.

To avoid physical delivery, close your position two business days before the First Notice Day or one business day before the Last Trading Day, whichever comes first. If your account still holds a position in a physically settled product after these dates, brokerages will close your position.

Rolling a position means closing the current position and opening a new one in the next contract month. Note:

• The closed position and the new position will differ in price.
• There will be transaction costs for each trade.