Futures Contract Expiration Explained

Definition
Futures expiration marks the end of a contract’s lifecycle. When a futures contract expires, it’s settled, either in cash or through physical delivery based on the contract’s specs. If you’re still holding the position when it expires, the exchange finalizes the trade, whether you’re ready or not.

What does expiration mean in futures?

Unlike stocks, which you can hold indefinitely, or options, which give you the right to act, futures contracts come with a built-in expiration date. It’s the point when the trade officially ends.

Once a contract reaches expiration:

• You can no longer buy or sell it

• The exchange calculates a final price

• Your account is either credited or debited, or physical delivery is initiated (depending on the contract)

This makes futures different from other assets. You’re entering into a time-bound agreement, and if you don’t manage your position before that agreement ends, it gets settled for you.

Why do futures contracts expire?

Futures contracts were originally designed for producers and buyers of physical goods (think farmers, oil refiners, or gold dealers) to lock in prices in advance.

To make these agreements meaningful, they need a specific timeline. That’s where expiration comes in.

Expiration dates allow:

• Buyers and sellers to prepare for delivery or settlement

• Hedgers to manage price risk over fixed periods (1, 3, 6 months, etc.)

• Speculators to time their trades around known contract cycles

Each futures contract follows a standardized expiration schedule set by the exchange. Some expire every month. Others expire quarterly. The key is: every contract has a clear start and end date (and that’s intentional!).

What happens when a contract expires?

At expiration, your open position is automatically settled based on the rules of that contract. You don’t get to decide: the exchange does it for you.

There are two outcomes:

• If the contract is cash-settled, your account is adjusted based on the difference between your entry price and the final settlement price.

• If the contract is physically settled, you (or your broker) may be expected to deliver or receive the actual commodity.

For most retail traders, the goal is to exit the trade before expiration to avoid these outcomes, especially if the contract is physically delivered.

Once the contract expires, it disappears from the trading platform and can no longer be bought or sold.

Cash settlement vs. physical delivery

Futures settlement falls into one of two buckets, and which one applies depends entirely on the contract specs.

Cash settlement

With cash settlement, there’s no product changing hands. Instead, the exchange calculates a final settlement price, often based on an average or closing price on expiration day, and adjusts your account accordingly.

Example:
You buy 1 Micro Bitcoin futures contract (/MBT) at $55,000.
On expiration day, the final settlement price is $56,000.
Since each /MBT represents 0.10 BTC, you earn:

($56,000 – $55,000) × 0.10 = $100

That $100 gets added to your account. If the price had gone the other way, you’d be debited instead.

Physical delivery

In physically settled contracts, the asset is delivered — literally.

This applies to contracts like:

• Crude oil (/CL or /MCL)

• Gold (/GC or /MGC)

• Corn, wheat, soybeans

If you’re long at expiration, you’re expected to receive the asset. If you’re short, you’re expected to deliver it. That could mean 100 barrels of oil or 100 ounces of gold — not something most retail traders want to deal with.

That’s why brokers like MetroTrade require you to exit the position before expiration. If you don’t, your broker may force a liquidation to avoid triggering the delivery process.

What is the last day to trade?

The last day to trade is your deadline: the final opportunity to close your position before the exchange starts the settlement process.

• For cash-settled contracts, the last trading day is usually the same day as expiration.

• For physically settled contracts, it’s often a few days earlier, sometimes even a week or more before expiration.

Why? Because delivery requires time to process. The first notice date (FND) is when sellers can officially declare their intent to deliver the underlying asset. Brokers don’t want you anywhere near that process unless you’re qualified.

If you wait too long, your broker may auto-close your position. Worst case, you could accidentally trigger delivery if you’re using a less active brokerage or platform.

Always check the contract’s calendar. Know the last trading day, not just the expiration date.

Example: Micro Crude Oil (/MCL) expiration

You’re long 1 /MCL contract set to expire in June.

• Each /MCL contract represents 100 barrels of oil

• Expiration date: June 20

• First notice date: June 17

• Your broker sets June 14 as the last day to trade

If you don’t sell or roll the contract by June 14, your broker may close the trade for you to avoid delivery.

If crude oil moved in your favor, you’ll realize your profit at that point. If it moved against you, you’ll lock in your loss. Either way, the trade ends.

What is rolling a futures contract?

Rolling is how traders stay in the market without holding through expiration. It means you:

1. Exit your current position in the expiring contract

2. Open a new position in the next contract month

It’s typically done as one seamless transaction. For example:

Sell 1 /MCL June → Buy 1 /MCL July

Rolling helps you:

• Avoid physical delivery

• Maintain your market exposure

• Realize gains/losses in the expiring contract

It’s a standard part of trading futures actively. Just keep in mind, you’ll pay commissions on both the close and the reopen.

Futures vs. options expiration

Both futures and options expire — but the mechanics are completely different.

Options give you the right (but not the obligation) to buy or sell an asset. If you don’t act by expiration, the option can expire worthless.

Futures are binding agreements. When they expire, they settle automatically, there’s no choice.

Bottom line: you can’t ignore expiration in futures the way some traders do with options. It will impact your account.

How to manage expiration as a trader

Retail futures traders typically do one of two things before expiration:

1. Close the trade: realize your gain or loss and move on

2. Roll the contract: maintain exposure in a new month

Best practice? Always be proactive.

• Know the expiration and last trade dates

• Plan your exit or roll at least a few days early

If you’re holding micro contracts like /MCL, /MES, or /MBT, this process is simple. It just takes awareness and action.

Key takeaway

Futures expiration isn’t something you can ignore. It’s a fundamental part of how these contracts work.

Here’s what to remember:

• Every futures contract has a fixed expiration
• Open positions are automatically settled at that time
• Cash-settled contracts adjust your account
• Physically settled contracts require earlier exits
• Always track the last day to trade, not just expiration
• Rolling lets you stay in the market without triggering settlement

Futures give you control, leverage, and flexibility, but only if you manage your position before time runs out.

Understanding expiration is a key part of managing risk, but it’s just one piece of the puzzle. In the next article, we’ll show you how to read and use futures market data like prices, volume, and open interest, so you can make smarter, more informed trading decisions from day one.

Next lesson: How To Use Futures Market Data for Trading →

Frequently Asked Questions