How do delivery months and expiry work for futures?

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AcadiFi · Accepted Answer

Each listed contract references a delivery month. The contract ceases trading on an exchange-specified last trading day within that month, and delivery (if physical) occurs during a delivery window that can span several days.

Three dates matter:

1. **First notice day** — earliest date the short can declare intent to deliver. Longs who don't want delivery should close before this.

2. **Last trading day** — the final day the contract trades. For CME Treasury futures this is typically seven business days before the end of the delivery month.

3. **Delivery day** — when ownership transfers. For financial futures that are cash-settled, this is simply the cash mark.

A trader named Isabela Torrens holding March 2027 ten-year Treasury futures as a speculator would roll to June before first notice day to avoid being assigned a bond basket.

Listed cycle conventions vary. Eurodollar futures historically listed quarterly out ten years. Corn follows March/May/July/September/December. Stock index futures use the quarterly IMM cycle (H, M, U, Z).

Expiry convergence is a key property: as the contract approaches last trading day, futures price converges to spot. If it didn't, arbitrageurs would trade the basis to close the gap. Understanding the calendar matters not just for position management but also for basis risk on hedges that don't line up perfectly with exposure dates.

How do delivery months and expiry work for futures?

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