Every futures contract has an end. What happens there depends on one property of the contract: whether it is settled in cash or by physical delivery. For almost all private traders the answer is the same – you do not hold to expiry – but the contract’s settlement type decides how final the last day is and what a mistake would cost. This guide goes through both types and the exceptions.
Cash settlement: the account is credited or debited
A cash-settled futures contract ends with a payment. After the last trading day the exchange determines a final settlement price, usually from an index or a reference rate, and every open position is closed at that price. Your gain or loss is booked to the account, and the position disappears. Nothing is delivered. Examples:
- E-mini S&P 500 (ES) and E-mini Nasdaq-100 (NQ): settled to the Special Opening Quotation (SOQ) of the index on the third Friday of the contract month (trading stops at 9:30 a.m. ET).
- Bitcoin (BTC): cash-settled to the CME CF Bitcoin Reference Rate at 4:00 p.m. London time on the last Friday of the contract month.
- Lean Hogs (HE): settled to the CME Lean Hog Index; Feeder Cattle (GF) to the CME Feeder Cattle Index.
- Micro WTI Crude Oil (MCL) and Micro Copper (MHG): settled to the price of the full-size contract, and they stop trading earlier than that contract.
If you forget a cash-settled position, the result is not a disaster: it is closed at the settlement price. The cost is that you lose control of the exit price and, for index futures, accept the Special Opening Quotation, which is calculated from the first trade of each stock in the index and can differ noticeably from the index level at 9:30 a.m. ET.
Physical delivery: someone has to deliver something
A physically delivered contract ends with an exchange of the real thing. The short delivers, the long takes delivery and pays. In most markets the process starts before the last trading day, with the delivery notices of the first notice day; in crude oil, natural gas and currency futures it starts after trading ends. The details differ by market:
| Market | What is delivered | Last trading day |
|---|---|---|
| GC Gold | Delivery of 100 troy oz gold bars from COMEX-approved depositories | Trading terminates on the third last business day of the contract month |
| CL Crude Oil (WTI) | Delivery at Cushing, Oklahoma, ratably over the contract month | 3 business days before the 25th calendar day of the month prior to the contract month (4 business days if the 25th is not a business day) |
| NG Natural Gas (Henry Hub) | Delivery at the Henry Hub (Sabine Pipe Line), Louisiana | 3 business days prior to the first calendar day of the contract month |
| ZC Corn | Delivery via shipping certificates at approved locations | Trading terminates on the business day prior to the 15th calendar day of the contract month |
| ZN 10-Year T-Note | Delivery of eligible Treasury notes via the Federal Reserve book-entry system | Seventh business day preceding the last business day of the delivery month |
| 6E Euro FX | Delivery of euros on the third Wednesday of the contract month | 9:16 a.m. CT on the second business day before the third Wednesday of the contract month |
| LE Live Cattle | Delivery of live cattle at approved livestock yards | Last business day of the contract month |
| KC Coffee | Delivery from exchange-licensed warehouses | One business day prior to the last notice day of the delivery month |
Taken from the CME and ICE specifications as shown on each contract page.
A few points that surprise newcomers:
- The seller chooses. In most markets the short decides when in the delivery period to issue the notice and, within the rules, what exactly is delivered (a Treasury bond, a warehouse, a grade). The long takes what comes.
- Longs are assigned. The clearing house assigns the notice to a long position – in grains, Treasuries and live cattle to the oldest one by original trade date. You do not get to say no once you are in the system.
- Costs. Delivery involves exchange and clearing fees, storage or financing, and the full value of the contract. The account that held a small margin suddenly owes a very large amount.
- The currency futures (Euro FX (6E)) exchange the currencies usually two business days after the last trading day, in the amounts of the contract.
When the last day can bite
The extreme example is WTI crude oil. On 20 April 2020 the expiring May contract (CL), one day before it expired, settled at −$37.63 a barrel: storage at Cushing was nearly full, and holders who could not take delivery had to sell at any price. The contract is physically delivered, so the price of the last days reflects what it costs to get rid of the oil. The lesson is not that oil will do it again but that the final trading days of a delivery contract can follow different rules from the days before.
Other things that go wrong at the end:
- Thin trading in the expiring month means wide spreads and poor fills.
- Forced liquidation by the broker, usually well before the exchange date (see holding past first notice day).
- Mixing up the dates of the full-size and micro contracts: the cash-settled micro can stop trading earlier than the contract it follows (MCL one business day before CL, MHG about a month before HG).
How to avoid it
- Know whether your contract is cash-settled or physically delivered; every contract page here shows the settlement type under “Specifications”.
- Put the broker’s deadline and the exchange’s last trading day in your calendar.
- Close or roll positions in a liquid month, and not in the last day’s trading.
The calculated dates for every active month are on the contract pages and in the calendar.
This guide describes the settlement rules in general terms. Always use the current exchange specification and your broker’s rules.
Educational content only – not investment advice. Futures trading involves substantial risk of loss.