What actually happens at Rollover if .... ?

Big_P

Member
67 9
This may be a very simple question but ....


If you hold a futures contract and you let it expire, what is the exact process at expiry?

So let's take the attached JPEG as an example. The chart is a 1 minute DAX.

Let's say I bought 1 contract at 12,413.

Then I held the contract and let it expire at 12,398.

What happens now? Do the exchange then contact you? Who do I owe the money to? How is the difference resolved?


To take this a stage further, assuming I was trading Brent Oil Future and did the same thing?

Would I actually have to take delivery of some oil? Would the exchange call me up and arrange to dump a whole load of oil on my doorstep??

This might be basic stuff but one can only learn if one asks :)

Thanks!

Big P
 

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new_trader

Legendary member
6,231 1,282
If you are trading real futures (as opposed to spread betting)

Then:

If you are trading a cash settled futures contract (e.g. Equity index) and hold until expiry then your position is closed. Your account is either credited or debited the difference depending on whether it expired in profit or loss. This would be no different to closing it yourself prior to expiry.

If you are trading a Physically settled futures contract (e.g. Crude Oil) and hold until expiry

Then:

If your broker does not allow physical settlement they will close your position (if you don't) prior to first notice day. Your account is either credited or debited the difference depending on whether it expired in profit or loss.

If your broker does allow you to take delivery then you will need to pay all the settlement fees and inform them how you will take delivery, otherwise it is put into storage and you start paying monthly storage fees.


Ref: light-sweet-crude_contract_specificationsl

Delivery Procedure:

Delivery shall be made free-on-board ("F.O.B.") at any pipeline or storage facility in Cushing, Oklahoma with pipeline access to Enterprise, Cushing storage or Enbridge, Cushing storage. Delivery shall be made in accordance with all applicable Federal executive orders and all applicable Federal, State and local laws and regulations.

At buyer's option, delivery shall be made by any of the following methods: (1) by interfacility transfer ("pumpover") into a designated pipeline or storage facility with access to seller's incoming pipeline or storage facility; (2) by in-line (or in-system) transfer, or book-out of title to the buyer; or (3) if the seller agrees to such transfer and if the facility used by the seller allows for such transfer, without physical movement of product, by in-tank transfer of title to the buyer.
 
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Big_P

Member
67 9
If you are trading real futures (as opposed to spread betting)

Then:

If you are trading a cash settled futures contract (e.g. Equity index) and hold until expiry then your position is closed. Your account is either credited or debited the difference depending on whether it expired in profit or loss. This would be no different to closing it yourself prior to expiry.

If you are trading a Physically settled futures contract (e.g. Crude Oil) and hold until expiry

Then:

If your broker does not allow physical settlement they will close your position (if you don't) prior to first notice day. Your account is either credited or debited the difference depending on whether it expired in profit or loss.

If your broker does allow you to take delivery then you will need to pay all the settlement fees and inform them how you will take delivery, otherwise it is put into storage and you start paying monthly storage fees.


Ref: light-sweet-crude_contract_specificationsl

Delivery Procedure:

Delivery shall be made free-on-board ("F.O.B.") at any pipeline or storage facility in Cushing, Oklahoma with pipeline access to Enterprise, Cushing storage or Enbridge, Cushing storage. Delivery shall be made in accordance with all applicable Federal executive orders and all applicable Federal, State and local laws and regulations.

At buyer's option, delivery shall be made by any of the following methods: (1) by interfacility transfer ("pumpover") into a designated pipeline or storage facility with access to seller's incoming pipeline or storage facility; (2) by in-line (or in-system) transfer, or book-out of title to the buyer; or (3) if the seller agrees to such transfer and if the facility used by the seller allows for such transfer, without physical movement of product, by in-tank transfer of title to the buyer.

An excellent response and now all completely clear.

Thank you very much New_Trader.
 

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