Commodities course · Section 2: Commodity Futures in Depth
Futures Expiry and Rolling: First Notice Day, Last Trading Day and the Roll
Why futures expire, what first notice day and last trading day mean, when traders roll to the next month, and what rolling costs.
Intermediate6 min read·6:22 video·Lesson 9 of 26·quiz: 4 questions
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Every futures contract has an end date: after the last trading day, remaining positions are settled by delivery or by a final cash payment. Speculators who want to keep their position "roll" it, closing the expiring contract and opening a later month, usually days or weeks before first notice day or expiry. Rolling has a cost or a benefit, set by the price gap between the two months.
The key dates
First notice day
For physically delivered contracts, first notice day (FND) is the first day on which a seller can give notice of intent to deliver, and the exchange can assign that delivery to someone holding a long position. For COMEX gold, first notice day is the last business day of the month before the delivery month. If you are long and still holding after FND, you could find yourself responsible for paying for and receiving 100 ounces of gold.
Last trading day
The last trading day (LTD) is when trading in the contract stops. It differs a lot between contracts:
| Contract | Settlement | Last trading day (simplified) |
|---|---|---|
| WTI crude (CL) | Physical, Cushing | Three business days before the 25th calendar day of the month before the delivery month (adjusted if the 25th is not a business day) |
| Natural gas (NG) | Physical, Henry Hub | Three business days before the first calendar day of the delivery month |
| Gold (GC) | Physical | Third-last business day of the delivery month |
| Corn (ZC) | Physical | The business day before the 15th calendar day of the delivery month |
The exact rules are on each exchange's specification page, and the exchange publishes a calendar with the actual dates. Notice that a "December" crude contract stops trading in November: the delivery month and the trading month are not the same.
Your broker's dates
Many retail futures brokers require you to close or roll physically delivered contracts several days before FND or LTD and will liquidate positions automatically if you do not. CFD brokers that base prices on futures roll on their own schedule and usually make a cash adjustment to your account to reflect the price difference between months. Read your broker's policy; it overrides your own plans.
How a roll works
A roll is two trades: close the old contract and open the new one in the same direction.
Example
You are long one December WTI contract bought at $80.00. It now trades at $82.00, and January trades at $82.40. You sell December at $82.00, banking (82.00 - 80.00) x 1,000 = $2,000, and buy January at $82.40. You still have the same exposure to oil, but your position is now in a contract priced $0.40 higher.
You can enter the two legs separately, but most platforms offer a calendar spread order that trades both legs together at a single price difference, here -$0.40 (December minus January). Spread orders reduce the risk that the market moves between your two trades and usually have tighter pricing.
Adjust your stop after rolling
Your stop was set on the old contract's prices. To keep the same risk, move it by the gap between the two months.
Example
Your stop on December was $78.00, which was $4.00 below the market at $82.00. January trades $0.40 higher, so the equivalent stop is $78.40, still $4.00 below January's $82.40. Leaving the stop at $78.00 would quietly increase your risk by $400 per contract.
When to roll: follow the liquidity
Trading volume and open interest move from the expiring contract to the next one ahead of expiry. A common approach is to roll when the next contract's volume or open interest overtakes the current one, or on a fixed number of trading days before FND or LTD. Whatever rule you choose, write it down and use it consistently, especially in a backtest.
Not every month is equally liquid. Gold traders usually roll between the active months (February, April, June, August, October, December). Corn traders face a special choice between old crop and new crop: the July contract reflects grain already harvested, while December reflects the coming harvest, and the two can trade at very different prices because their supply pictures differ.
Roll cost and roll yield
If the next contract is priced higher than the one you are leaving, a long position "buys higher" each time it rolls. If spot prices stay flat, the new contract tends to drift down towards spot as it approaches its own expiry, and that drift is a cost to the long. If the next contract is lower, the long gains from rolling.
Example
Rolling from $82.00 to $82.40 costs 0.40 / 82 = about 0.49% if spot prices do not change. If every monthly roll looked like this, the drag would be roughly 12 x 0.49% = about 5.9% a year.
This effect, called roll yield, is one of the most important ideas in commodity investing. It gets its own lesson: contango and backwardation.
April 2020: what can go wrong near expiry
In April 2020, lockdowns had crushed fuel demand and storage tanks at Cushing, Oklahoma, the delivery point for WTI, were filling fast. As the May 2020 contract approached its last trading day, holders who could not take delivery had to sell, and few buyers had anywhere to put the oil. On 20 April 2020, the May contract settled at -$37.63 per barrel: sellers paid buyers to take contracts off their hands. The June contract stayed above $20 the same day.
The lesson is simple: never hold a physically delivered contract into its final days unless you are set up to make or take delivery. The full story and its other lessons are in the crude oil lesson.
A practical roll checklist
- Look up FND and LTD for every contract you hold, using the exchange calendar.
- Set a reminder some trading days ahead (5 to 10 is a common rule of thumb), earlier if your broker's cut-off is earlier.
- Roll with a calendar spread order during liquid hours.
- Move your stop by the spread between the two contracts.
- Record the roll in your journal, including its cost, so your results reflect reality.
Tip
A front-month chart jumps at every roll because it switches from one contract to the next. Do not mistake a roll gap for a real price move, and never place stops based on a level that only existed in the old contract.
Key takeaways
- First notice day is when longs in physically delivered contracts can be assigned delivery; speculators exit before it.
- Last trading day differs by contract: for WTI it falls in the month before delivery, for gold near the end of the delivery month.
- Rolling means closing the expiring contract and opening a later one; a calendar spread order does both at once.
- When you roll, shift your stop by the price gap between the two months to keep the same risk.
- April 2020 showed that holding a delivered contract into its final days can produce prices nobody expected.
Quiz: check what you learned
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