The fundamental principle of futures contracts is that they expire on certain date in the future. On the date of expiration, the physical commodity gets delivered to a holder of the futures contracts.

This specific date is called the expiration date of the futures contract. You can close the futures contract position whenever before the expiration date, as we have already explained in Chapter 2. In other words, for closing the trading position you do not need to wait till the futures contract reaches the expiration date.

In fact, many short-term traders and speculators hold their trading positions open only for few hours, some even only for few minutes or even few seconds.

On the 3 rd of August we decided to buy one futures contract of corn, based on our market analysis various types of analysis will be explained in another section of this Handbook. Expiration month of the corn futures contracts are March, May, July, September and December this information can be found both on commodity exchange website and the trading platform of your broker.

We plan to keep our futures contract position open for about three months. Based on our market analysis we expect the price of corn to reach the value on which we speculate.

Therefore it is a long-term position. By adding three months to the date of the 3 rd of August , we get the date of the 3 rd of November Therefore we shall trade the contract expiring in December because contract expiring in September would not fulfil the requirement of holding the trading position for three months.

However, if we planned to hold the contract only for few days, we could buy the futures contract which expires in September.

Duration of futures contracts is usually proportional to their liquidity. In trading terminology Liquidity means that the given futures contract is traded by a sufficient number of traders.

Therefore there is a high probability to be able to buy or sell the futures contract for price we planned. In other words, we can say that the more traders trade the given commodity at the same time, the more liquid is the market.

This way they largely avoid problems related to trade execution. Trade Execution means filling your trading orders through your broker, i. Please, remember that in order to be able to sell your contract on commodity exchange for the planned price, there must always exist counterparty in the form of a buyer.

In case of contracts with the nearest expiration months you can be very well sure that there is a high level of liquidity in the market and it is likely that you will be able to buy or sell the contract at a price you planed. You will not be forced by the market to buy or sell for much lower price which could significantly reduce your planned profit.

Commodity Prices / Quotes & Commodity Charts - Free

All futures contracts are standardized, which means that commodities get traded in standardized units and quantity in clearly defined quality. For instance a single futures contract of gold consists of troy ounces of carat gold. A single futures contract of corn consists of 5, bushels of corn i. Many of you may have already thought of questions like: What if I was not able to sell my futures contract before its expiration?

Does it mean that if I did not sell the futures contract and it expired, there will be a truck unloading metric tons of corn at my door steps? Rest assured that it is almost always possible to sell your futures contract before its expiration. However, it is wise to watch for so called First Notice Day FND.

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However, some commodities do not have FND at all. FND differs depending on each market. Therefore, most investors close their positions before the FND. Information about FND of each specific market is provided by most of software platforms, trading platforms of your brokers or it can be found on website of relevant commodity exchange. You can also find this information in our Trading Calendar.

Therefore we always recommend you to close all your futures positions to FND at the latest. Closing positions within the period before the FND ensures the traders with the sufficient market liquidity for all commonly traded commodities. After the FND, the liquidity, i. Honestly, you as traders-speculators should avoid the LTD like the plague.

If you didn't manage to sell your futures contracts before the LTD, you will have to accept delivery of the physical commodity. The clearing of the contract is guaranteed by the commodity exchange Clearing House under stringent regulation.

Thanks to high liquidity of commodity markets, it is very unlikely that you could not sell your futures contract before the FND. Moreover, many brokers such as Interactive Brokers will not even enable you to hold your trading position after the FND, because their clients belong to the group of traders - speculators.

Therefore these brokers automatically close open positions of their clients on the FND. However, it is necessary to bear in mind the FND and the LTD and to highlight these dates in your trading calendar!

In this chapter, we introduced the principle of futures contracts expiration and explained the term "liquidity". We also set light to futures contracts standardization. Finally, we went through the two most important dates in trading of futures contracts, the FND and LTD. If you were not sure where to search for FND and LTD, take the advantage of our Trading Calendar. Traders exploiting automated trading strategies have probably the most significant advantage over discretionary traders In our previous articles we explained why it is not possible to use historical In our courses of Working with SeasonAlgo platform we always focus a lot on It's ubiquitous - stocks, commodities, currency pairs Forex.

Day by day we keep hearing Bi-Weekly Analysis of Futures Spread Strategies. Introduction to Futures Spread Trading — FREE Webinar. Commodity and Futures Spread Trading — online course. Using the SeasonAlgo Platform — online course.

Analysis of Live Cattle Futures Spread for March Watch New Video — Recording of FREE Webinar of Futures Spread Trading. Any information provided by TradeandFinance. In case there are particular financial instruments, trading strategies, underlying assets or derivatives mentioned on www. Never enter any trade whose nature and rules you do not fully understand. The risk of loss in trading commodities can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your financial condition.

Moreover, results of historical trades are no guarantee of future trading profits. All data presented by TradeandFinance.

Glossary of Commodity Futures Trading Terms

However, please always verify up-to-dateness of provided information at source sites of relevant exchanges, brokers or other sources of information used. News Articles Courses Events Software Video About Us Partners Contact Forum. Let's explain this principle by an example below: Standardization of Futures Contracts All futures contracts are standardized, which means that commodities get traded in standardized units and quantity in clearly defined quality.

Futures contracts - First Notice Day "FND" Many of you may have already thought of questions like: Futures contracts - Last Trading Day "LTD" Honestly, you as traders-speculators should avoid the LTD like the plague.

Statistical Analysis in Exchange Trading Traders exploiting automated trading strategies have probably the most significant advantage over discretionary traders How not to Search for Profitable Commodity Spreads In our courses of Working with SeasonAlgo platform we always focus a lot on Exchange Trading — Casino or a Path to Independence and Wealth?

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