What are expiry futures?

Expiry futures, also called dated futures, are futures contracts with an expiry time written in advance. What a trader holds is not the spot asset itself but a price contract; if a position — the contract direction and quantity already established — is kept all the way to expiry, the trading venue determines a final settlement price under the contract rules and closes the contract.

A term like "delivery" readily suggests receiving something physical, but an expiry futures contract does not necessarily deliver a commodity or crypto asset at all. Some contracts deliver the underlying asset after expiry, while others only settle profit and loss at the final price. The specific outcome depends on the contract rules and cannot be judged from the word "delivery" alone.

Expiry futures put a price agreement and a definite date together

Every expiry futures contract corresponds to an underlying and a contract month or expiry date. The same asset can, for example, have separate contracts expiring this month, next month and at the end of a quarter at the same time. They are independent instruments, each with its own price, trading volume and expiry arrangements.

Establishing a long position means that a rise in the contract price usually produces a positive result; establishing a short position usually produces a positive result when the contract price falls. The actual outcome is also affected by the contract unit, fees, settlement currency and margin rules. Long and short here describe a contract direction; they do not indicate that a trader has bought or sold the spot asset.

To understand an expiry futures contract, you first have to be clear about at least the following fields:

• the underlying: which commodity, securities index or digital asset the contract price refers to;
• the contract unit: how much quantity or notional value one contract represents;
• the expiry date and last trading time: when establishing or closing positions in that expiry month stops;
• the quotation and settlement currency: what the price is measured in, and which asset or currency profit and loss is finally recorded in;
• the final settlement method: whether the underlying is delivered at expiry, or only a price difference is settled;
• the margin rules: how much collateral establishing and maintaining a position requires, and what happens when it falls short.

The expiry date, the last trading day and the final settlement time are not necessarily all the same. A trading venue may stop trading first and then calculate a final settlement price over a specified time window, so that contract's official rules should govern.

Margin lets a position's value exceed the amount actually deposited

Futures usually use a margin system. Margin is collateral deposited to meet contract obligations; it is not payment in full for purchasing the underlying asset. A position's notional value can be higher than the margin, so a relatively small price change may also produce a comparatively large gain or loss relative to the margin.

A trading venue recalculates position value and account equity under its rules. When a market moves unfavourably, available margin decreases; once an account no longer meets maintenance requirements, a trader may need to add margin, or the system may reduce or close positions. Once a position has been forcibly closed before expiry, it no longer takes part in that contract's final settlement.

The U.S. Commodity Futures Trading Commission's note on futures margin explains margin as funds that secure performance, and explains that futures positions are revalued as the market changes. Calculation frequency, price sources and forced-closing procedures are not the same across trading venues.

Before expiry you can close, hold to settlement or change months

Holding a position does not have to mean waiting for expiry. There are usually three different outcomes before expiry:

1. closing: establishing a trade in the opposite direction and the same quantity, offsetting the original position;
2. holding to expiry: letting an open position enter the final settlement or delivery process the contract specifies;
3. rolling over: closing a contract near expiry while establishing a new position in a later expiry month.

Rolling over does not modify the original contract's expiry date to a later one. It consists of two independent trades: the old contract ends, and the new contract starts from a new execution price. The two expiry months may have different prices, and bid-ask spreads, fees and the timing of execution also affect the result of the switch.

CME Group's note on futures expiration and settlement likewise distinguishes closing before expiry, changing contract months and holding to settlement. These are common outcomes; they do not mean every trading venue offers exactly the same procedures.

A final settlement price is not necessarily the last traded price

At expiry, a trading venue calculates a final settlement price by a method published in advance. That price may come from a spot index, a reference rate, an average price over a period, or another benchmark the contract rules specify. Using a price window can reduce the influence of any single trade on the settlement result, but it does not remove the risks arising from index composition, a data interruption or extreme market conditions.

A final settlement price is used mainly to close expiring positions and determine final profit and loss. It may not be the same number as the latest traded price, the index price or the mark price used for risk control on a trading interface. When reading contract rules, you need to establish separately what each of these prices is used for.

Different products use different methods. For example, CME's bitcoin futures contract specifications state that the product is financially settled and closes expiring contracts at a specified reference price; OKX's note on expiry futures settlement instead explains that its related products settle at an average of index prices over a period before expiry. These two examples serve to show that methods may differ; they cannot substitute for the specific rules of a current contract.

Expiry settlement may deliver the underlying, or may settle only a difference

Physical delivery and cash settlement handle two different outcomes:

• physical delivery: a qualifying long receives the underlying, and a short delivers the underlying or a corresponding delivery instrument; the underlying, location, quality and timing are all specified by the contract rules;
• cash settlement: the underlying itself is not transferred; instead profit and loss is recorded to an account according to the final settlement price, and the expiring position then terminates.

"Physical" in a futures context does not only mean a commodity you can touch; it may also be a financial instrument the contract permits to be delivered. Cash settlement is sometimes also called settlement in cash, but the actual unit of account still depends on the product rules; in crypto asset markets, profit and loss may be recorded in a fiat-denominated balance, a stablecoin or another specified asset.

A physically delivered contract will also have additional requirements such as notice days, delivery eligibility and storage. Even though most traders close before expiry, as long as a contract permits physical delivery you still need to know the conditions under which a position enters the delivery process. CME Group's expiration course explains that some of its commodity futures use physical delivery, while other products complete cash settlement through a debit or credit to an account.

An expiry futures price can be higher or lower than a spot price

The difference between a futures price and a spot price for the same underlying is usually called the basis. A futures price may be higher than spot and may also be lower; the difference is affected by funding costs, the cost of holding or storage, market supply and demand, the remaining term, and the pricing of future delivery conditions.

As expiry approaches, a futures contract must finally end under its delivery conditions or settlement benchmark, so the futures price and the corresponding benchmark usually converge. "Converge", however, does not mean the two are always equal during the trading period. When market liquidity is insufficient, trading sessions differ or a reference index behaves abnormally, an evident difference may still appear close to expiry.

There may also be a price difference between expiry months. When rolling a position near expiry into a more distant month, a trader ends at one price and then establishes a new position at another, so the result of a roll cannot be judged from the underlying spot's movement over that period alone.

The core difference between expiry futures and perpetual contracts is whether there is an endpoint

Expiry futures have a predetermined expiry date; a perpetual contract has no fixed expiry date and can continue to exist as long as the position meets platform rules. Both may use margin and leverage, but they keep a contract price close to a reference spot price in different ways. Perpetual contracts commonly use a funding fee — a payment settled periodically between long and short positions under set rules — to help narrow a price deviation.

"Usually" matters here: trading venues may adopt different fee, settlement and risk-control designs. To establish a product's type, look at the official contract specifications rather than judging from a name in an interface.

Expiry settlement and forced closing are not the same thing

Expiry settlement happens because a contract has reached its preset endpoint, and all positions still qualifying for settlement end under uniform rules. Forced closing instead usually happens when margin falls short or a risk limit is triggered, and it may come earlier than the expiry date.

The prices the two use may also differ. Forced closing may refer to a mark price — a reference price a trading venue calculates by its risk-control method and uses to assess position risk — while final settlement uses the settlement benchmark the contract specifies. Mixing the two together leads to the mistaken belief that knowing an expiry price is enough to judge whether a position can be kept all the way to expiry.

Daily or periodic settlement of profit and loss is likewise not the same as a contract expiring. Some trading venues convert part of an unrealized gain or loss into a realized one, or update a position's cost, while the position is held; the position quantity does not automatically fall to zero because of this. An expiring contract only ends once final settlement is complete.

The risks of expiry futures do not come from price direction alone

Besides changes in the underlying's price, expiry futures may also be affected by the following:

• leverage and margin risk: a relatively small price change may reduce account equity quickly and trigger forced closing before expiry;
• basis risk: a futures price and a spot or reference index may change by different magnitudes;
• roll risk: the price difference between expiry months and the trading costs change the result of holding continuously;
• settlement risk: a final price depends on a specified benchmark, a calculation window and rules for handling abnormal situations;
• liquidity risk: a month close to expiry or with little trading may show wider spreads, making it hard to close at an expected price;
• delivery risk: a physically delivered contract may create obligations to receive, deliver, store and schedule;
• collateral asset risk: when another asset serves as margin or unit of settlement, the collateral asset's own price may also change;
• trading venue and system risk: rule changes, technical failures, account restrictions or clearing arrangements may all affect how a position is handled.

An expiry date only states when a contract ends. It does not limit the losses that may arise before expiry, and it does not guarantee that a position can be kept all the way to final settlement.

After reading a contract name you still have to check the full specifications

Some trading venues write an expiry date or month into a contract code, marking different contracts by year, month or quarter, for example. A code helps distinguish instruments, but cannot describe the rules completely. When reading an expiry futures contract, you can check in turn:

1. which underlying and expiry month the code points to;
2. what the last trading time and the final settlement time each are;
3. how much quantity or notional value one contract represents;
4. which asset margin and profit and loss are calculated in;
5. which index, time window and abnormal-situation rules the final settlement price uses;
6. whether expiry uses physical delivery or cash settlement;
7. whether there are position limits, margin adjustments or automatic handling arrangements before expiry;
8. where the rules on fees, forced closing and dispute handling are set out.

These fields together determine how a contract works. Knowing only that something "expires in a certain month" is still not enough to judge what will happen to a position before and after expiry.

FAQ

Will an expiry futures contract automatically buy me the underlying asset after expiry?

Not necessarily. A physically delivered contract may transfer the underlying or a delivery instrument, while a cash-settled contract only records final profit and loss to an account. A crypto asset expiry futures contract may also settle profit and loss in a specified asset rather than hand the underlying itself to the position holder.

Can I exit an expiry futures contract before expiry?

You can usually close a position through an opposite trade, but whether it executes and at what price depends on market liquidity and trading venue rules. Once closed, that position no longer enters final settlement.

Does rolling over simply extend the original position?

No. Rolling over usually means closing a contract near expiry and then establishing a later-expiring one. The two contracts may differ in price, liquidity and margin requirements.

Do expiry futures require paying a funding fee?

They usually do not use the perpetual-contract mechanism of periodically exchanging a funding fee between longs and shorts, but there may still be trading fees, margin costs, delivery fees or other product fees. The specific contract rules should govern.

If I do not close before expiry, will I certainly be forcibly closed?

Not necessarily. A position that meets margin requirements usually enters final settlement or delivery under the product rules; a position short of margin may be closed earlier. Different products may also adjust position or margin limits close to expiry.

Related concepts

Continue with digital asset, or return to the Crypto Glossary.

Sources

• U.S. Commodity Futures Trading Commission: the economic purpose of futures and margin — a basic explanation of margin, revaluation against the market and performance obligations.
• CME Group: Get to Know Futures Expiration and Settlement — closing before expiry, rolling over, final settlement, physical delivery and cash settlement.
• CME Group: Bitcoin Futures Contract Specs — a case of contract months, termination of trading and financial settlement for bitcoin futures.
• OKX: expiry futures settlement price — a product case of a crypto asset expiry futures contract using a price window to calculate a final settlement price.