When Do Futures Contracts Expire?
Futures contracts are agreements between two parties to buy or sell an asset at a specific price and date in the future. As an investor, it is essential to understand when these contracts expire, as it can impact your investment strategy and potentially lead to financial losses.
Futures contracts have a set expiration date, which is the final day on which the contract can be traded. Once the expiration date has passed, the contract is closed, and the underlying asset is delivered or settled in cash. It is crucial to note that not all futures contracts expire on the same date, and different markets and contracts have unique expiration dates.
Typically, futures contracts have a quarterly expiration cycle, which means they expire four times a year, on the third Friday of March, June, September, and December. This cycle is known as the “March Quarterly,” “June Quarterly,” “September Quarterly,” and “December Quarterly.”
For example, if you purchase a futures contract for crude oil, and it has a March quarterly expiration date, the contract will expire on the third Friday of March. If you do not close out the contract by this date, the contract will be settled, and you will either receive or deliver the underlying asset, depending on whether you are the buyer or the seller.
In addition to the quarterly cycle, some futures contracts have different expiration dates. For instance, some commodities, such as agricultural products, may have monthly expiration dates, while financial futures, such as stock index futures, may have quarterly and monthly expiration dates.
It is also essential to keep in mind that futures contracts have different trading hours, depending on the market and contract. Some contracts trade 24 hours a day, while others only trade during specific hours. It is vital to check the trading hours before entering into a futures contract to ensure that you can monitor and manage your investment effectively.
In conclusion, understanding when futures contracts expire is crucial for investors in managing their investments and avoiding financial losses. It is recommended that investors do their research and consult with their financial advisor before investing in futures contracts to ensure they have a full understanding of the market and the contracts they are trading.