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Understanding Expiration And Futures Contracts Months

November 11, 2019 by Daniels Trading| Tips & Strategies

Understanding Expiration and Futures Contracts Months

By nature, a futures contract is a perishable security. It features a distinct expiration date when the legally binding agreement is settled. Upon expiration, the contract ceases to be tradable on the open market.

The concept of expiration makes futures contracts finite instruments, different from forex pairs or stocks. If you’re going to engage these exciting products, then understanding how futures contracts months relate to expiration is vital to your success as a trader.

During Which Futures Contracts Months Does Expiration Occur?

In the same fashion that each futures product is assigned a symbol and quantity, every listing has an expiration date. This date is listed in a contract’s specifications and represents the end of the contract’s tradable life cycle. No matter what futures product you trade, there will come a time when it’s no longer a valid financial instrument.

When a contract reaches its expiration date, a process known as settlement commences. Settlement is the procedure conducted by the exchange for closing out all open contracts. Settlement comes in two basic forms:

  • Physical delivery: The trader is required to either assume possession or produce a specified quantity of the contract’s underlying asset, such as bushels of corn.
  • Financial: The trader’s account balance is adjusted to reflect realized gains or losses at expiration.

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If you’re going to trade futures, it’s important to understand your contract’s expiration and settlement procedure. Aside from the two types of settlement, there are several kinds of expiration to be aware of:

  • Monthly: Contracts that expire on a monthly basis offer 12 unique listings for each calendar year. Typically, traders focus attention on the front-month issue, which is one month ahead of the present. In addition, some contracts feature a schedule that is largely monthly but allows for variance. An example of this phenomenon is the assigned expiration for the Chicago Mercantile Exchange’s (CME) full-sized gold listing.
  • Quarterly: Quarterly contracts are offered once every three months, or four times per year. These issues are useful in the application of longer-term trading strategies because liquidity is present even though expiration may be further out.
  • Seasonal: Seasonal expirations are typically implemented with respect to the production schedule of the underlying asset. For instance, seasonal expiration is common for ag commodities subject to planting and harvest.

The CME provides participants with a wide variety of products designed to aid in the pursuit of almost any financial goal. Here are the expiration types, settlement procedures, and calendar futures contracts months when several of the most popular “come off the board”:

Product Expiration Settlement Futures Contracts Expiration Months
E-Mini S&P 500 Quarterly Financial March, June, Sept., Dec.
E-Mini DOW  Quarterly Financial March, June, Sept., Dec.
E-Mini NASDAQ Quarterly Financial March, June, Sept., Dec.
Euro FX Quarterly Financial March, June, Sept., Dec.
Canadian Dollar FX Quarterly Financial March, June, Sept., Dec.
Japanese Yen FX Quarterly Financial March, June, Sept., Dec.
WTI Crude Oil Monthly Deliverable Jan. through Dec.
Henry Hub Natural Gas Monthly Deliverable Jan. through Dec.
Gold Variable Deliverable Feb, April, June, Aug., Oct., Dec.
Silver Variable Deliverable Jan., March, May, Sept., July, Dec.
Corn Seasonal Deliverable March, May, July, Sept., Dec.
Soybeans Seasonal Deliverable Jan., Mar, May, July, Aug., Sept., Nov.

Although futures are standardized, all expiration dates are not the same. To avoid any unexpected liabilities associated with delivery or financial settlement, it’s imperative to be aware of the futures contracts’ months of expiration. Fortunately, you can accomplish this task by simply referencing a contract’s specs.

Be Ready for Expiration!

Whether you’re a hedger or speculator, contract expiration and settlement can have major impacts on your trading operation. To stay current on what contract expiration may mean for your trading strategy, become a dt Insider. Featuring actionable trade recommendations and a daily market overview, it’s a  valuable resource for dealing with expiration on your terms.

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Filed Under: Tips & Strategies

About Daniels Trading

Daniels Trading is an independent futures brokerage firm located in the heart of Chicago’s financial district. Established by renowned commodity trader Andy Daniels in 1995, Daniels Trading is built on a culture of trust committed to the firm’s mission of Independence, Objectivity and Reliability.

Risk Disclosure

THIS MATERIAL IS CONVEYED AS A SOLICITATION FOR ENTERING INTO A DERIVATIVES TRANSACTION.

THIS MATERIAL HAS BEEN PREPARED BY A DANIELS TRADING BROKER WHO PROVIDES RESEARCH MARKET COMMENTARY AND TRADE RECOMMENDATIONS AS PART OF HIS OR HER SOLICITATION FOR ACCOUNTS AND SOLICITATION FOR TRADES; HOWEVER, DANIELS TRADING DOES NOT MAINTAIN A RESEARCH DEPARTMENT AS DEFINED IN CFTC RULE 1.71. DANIELS TRADING, ITS PRINCIPALS, BROKERS AND EMPLOYEES MAY TRADE IN DERIVATIVES FOR THEIR OWN ACCOUNTS OR FOR THE ACCOUNTS OF OTHERS. DUE TO VARIOUS FACTORS (SUCH AS RISK TOLERANCE, MARGIN REQUIREMENTS, TRADING OBJECTIVES, SHORT TERM VS. LONG TERM STRATEGIES, TECHNICAL VS. FUNDAMENTAL MARKET ANALYSIS, AND OTHER FACTORS) SUCH TRADING MAY RESULT IN THE INITIATION OR LIQUIDATION OF POSITIONS THAT ARE DIFFERENT FROM OR CONTRARY TO THE OPINIONS AND RECOMMENDATIONS CONTAINED THEREIN.

PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE PERFORMANCE. THE RISK OF LOSS IN TRADING FUTURES CONTRACTS OR COMMODITY OPTIONS CAN BE SUBSTANTIAL, AND THEREFORE INVESTORS SHOULD UNDERSTAND THE RISKS INVOLVED IN TAKING LEVERAGED POSITIONS AND MUST ASSUME RESPONSIBILITY FOR THE RISKS ASSOCIATED WITH SUCH INVESTMENTS AND FOR THEIR RESULTS.

TRADE RECOMMENDATIONS AND PROFIT/LOSS CALCULATIONS MAY NOT INCLUDE COMMISSIONS AND FEES. PLEASE CONSULT YOUR BROKER FOR DETAILS BASED ON YOUR TRADING ARRANGEMENT AND COMMISSION SETUP.

YOU SHOULD CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR CIRCUMSTANCES AND FINANCIAL RESOURCES. YOU SHOULD READ THE "RISK DISCLOSURE" WEBPAGE ACCESSED AT WWW.DANIELSTRADING.COM AT THE BOTTOM OF THE HOMEPAGE. DANIELS TRADING IS NOT AFFILIATED WITH NOR DOES IT ENDORSE ANY TRADING SYSTEM, NEWSLETTER OR OTHER SIMILAR SERVICE. DANIELS TRADING DOES NOT GUARANTEE OR VERIFY ANY PERFORMANCE CLAIMS MADE BY SUCH SYSTEMS OR SERVICE.

GLOBAL ASSET ADVISORS, LLC (“GAA”) (DBA: DANIELS TRADING, TOP THIRD AG MARKETING AND FUTURES ONLINE) IS AN INTRODUCING BROKER TO GAIN CAPITAL GROUP, LLC (GCG) A FUTURES COMMISSION MERCHANT AND RETAIL FOREIGN EXCHANGE DEALER. GAA AND GCG ARE WHOLLY OWNED SUBSIDIARIES OF STONEX GROUP INC. (NASDAQ:SNEX) THE ULTIMATE PARENT COMPANY.

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Risk Disclosure

THIS MATERIAL IS CONVEYED AS A SOLICITATION FOR ENTERING INTO A DERIVATIVES TRANSACTION.

THIS MATERIAL HAS BEEN PREPARED BY A DANIELS TRADING BROKER WHO PROVIDES RESEARCH MARKET COMMENTARY AND TRADE RECOMMENDATIONS AS PART OF HIS OR HER SOLICITATION FOR ACCOUNTS AND SOLICITATION FOR TRADES; HOWEVER, DANIELS TRADING DOES NOT MAINTAIN A RESEARCH DEPARTMENT AS DEFINED IN CFTC RULE 1.71. DANIELS TRADING, ITS PRINCIPALS, BROKERS AND EMPLOYEES MAY TRADE IN DERIVATIVES FOR THEIR OWN ACCOUNTS OR FOR THE ACCOUNTS OF OTHERS. DUE TO VARIOUS FACTORS (SUCH AS RISK TOLERANCE, MARGIN REQUIREMENTS, TRADING OBJECTIVES, SHORT TERM VS. LONG TERM STRATEGIES, TECHNICAL VS. FUNDAMENTAL MARKET ANALYSIS, AND OTHER FACTORS) SUCH TRADING MAY RESULT IN THE INITIATION OR LIQUIDATION OF POSITIONS THAT ARE DIFFERENT FROM OR CONTRARY TO THE OPINIONS AND RECOMMENDATIONS CONTAINED THEREIN.

PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE PERFORMANCE. THE RISK OF LOSS IN TRADING FUTURES CONTRACTS OR COMMODITY OPTIONS CAN BE SUBSTANTIAL, AND THEREFORE INVESTORS SHOULD UNDERSTAND THE RISKS INVOLVED IN TAKING LEVERAGED POSITIONS AND MUST ASSUME RESPONSIBILITY FOR THE RISKS ASSOCIATED WITH SUCH INVESTMENTS AND FOR THEIR RESULTS.

TRADE RECOMMENDATIONS AND PROFIT/LOSS CALCULATIONS MAY NOT INCLUDE COMMISSIONS AND FEES. PLEASE CONSULT YOUR BROKER FOR DETAILS BASED ON YOUR TRADING ARRANGEMENT AND COMMISSION SETUP.

YOU SHOULD CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR CIRCUMSTANCES AND FINANCIAL RESOURCES. YOU SHOULD READ THE "RISK DISCLOSURE" WEBPAGE ACCESSED AT WWW.DANIELSTRADING.COM AT THE BOTTOM OF THE HOMEPAGE. DANIELS TRADING IS NOT AFFILIATED WITH NOR DOES IT ENDORSE ANY TRADING SYSTEM, NEWSLETTER OR OTHER SIMILAR SERVICE. DANIELS TRADING DOES NOT GUARANTEE OR VERIFY ANY PERFORMANCE CLAIMS MADE BY SUCH SYSTEMS OR SERVICE.

GLOBAL ASSET ADVISORS, LLC (“GAA”) (DBA: DANIELS TRADING, TOP THIRD AG MARKETING AND FUTURES ONLINE) IS AN INTRODUCING BROKER TO GAIN CAPITAL GROUP, LLC (GCG) A FUTURES COMMISSION MERCHANT AND RETAIL FOREIGN EXCHANGE DEALER. GAA AND GCG ARE WHOLLY OWNED SUBSIDIARIES OF STONEX GROUP INC. (NASDAQ:SNEX) THE ULTIMATE PARENT COMPANY.

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