The date on which a futures contract becomes invalid and is settled, either through physical delivery or cash settlement, depending on the contract specifications.
Why It Matters
- 1Futures contracts cannot be held indefinitely.
- 2Traders must close or roll over positions before expiration to avoid unwanted settlement or forced closure by the broker or prop firm.
Example
- 1A trader holds a futures contract nearing its expiration date.
- 2If they do not close or roll it over in time, the position may be automatically settled or closed according to the contract rules.
Common Mistakes
- ✖Forgetting contract expiration dates
- ✖Holding positions into expiration without understanding settlement type
- ✖Assuming all contracts are cash-settled
- ✖Not planning rollovers in advance