Expiration vs. Delivery

      Every futures contract expires, which is why they are called futures. They exist until a fixed time in the future, at which point they expire.

      Not every product goes into delivery–some of them cash settle like the equity indexes. As a general rule, if it is something you can physically hold (currency, treasuries, metal, oil, wheat, etc.) it goes into delivery. You always want to consult the exchange as to the delivery procedure of the product you plan to trade (cash settled or physical delivery).

      For cash settled products, you can trade the product all the way up until the expiration date. However, the closer in time you get to that date, the less the volume will be and the thinner the market will be because traders roll to the next traded month.

      For deliverable products you need to do your homework. Some products will go into delivery and then expire later (like treasuries) while some expire and then go into delivery (like energies). The rule of thumb for when to roll, for any product, is to switch no later than 1 business day before whichever is first between the first notice date (the first day of delivery notices) and the last trade date (expiration).

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