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What is a Futures contract expiration date?

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​​​​​​​A futures contract expiration date is the last day on which a futures contract is valid before it is settled. After this date, traders must either settle the contract or roll it over to a new contract.

Key Aspects of Futures Expiration
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1. Final Trading Day
   • This is the last day traders can buy or sell the contract before it expires.
   • The exact date varies by contract type (e.g., stock index futures may expire on the third Friday of the contract month).
2. Settlement Methods
   • Physical Delivery: The actual asset (e.g., oil, corn, gold) is delivered to the buyer.
   • Cash Settlement: No physical delivery—profit/loss is settled in cash (e.g., S&P 500 futures).
3. Rollover to a New Contract
   • Traders who want to maintain their position close the expiring contract and open a new one for a later date.
   • This is common in markets like commodities, stocks, and crypto futures.

Expiration Cycles

Futures contracts have different expiration schedules, such as:

• Monthly (e.g., crude oil futures)
• Quarterly (e.g., stock index futures expire in March, June, September, and December)
• Weekly (some short-term options on futures)

Example of Futures Expiration
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• A trader buys a December WTI Crude Oil Futures Contract in October.
• If the contract expires on December 20, the trader must either:
  Sell it before expiration to avoid delivery.
  Roll over to the next month's contract (January).
  Settle the contract physically or in cash, depending on the contract terms.

Why is Expiration Important?

Helps traders manage positions to avoid unexpected settlements.
Impacts futures prices, especially near expiration.
Affects liquidity—contracts with closer expiration dates are usually more liquid.

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