In futures trading, every contract comes with a predefined time frame. The expiry date is the last day a futures contract is valid for trading. After this date, the contract is compulsorily settled by the exchange through cash or physical settlement.
For stock and index futures in India, expiry is typically on the last Thursday of every month.
If that day is a trading holiday, expiry happens on the previous working day.
The expiry date is not just a calendar deadline—it impacts pricing, liquidity, trader behaviour, and settlement mechanics across the derivatives market.
Why is the Expiry Date So Important?
1. Settlement of Contracts
On expiry, all open positions are closed by the clearing corporation:
Cash settlement → Price difference is credited or debited
Physical settlement → Shares are delivered (for stock futures)
If a trader does not exit before expiry, they are automatically settled as per exchange rules.
2. Defines the Life of a Contract
Each futures contract has a limited duration. Once the expiry date arrives, that specific contract ceases to exist.
Traders can choose between near-month, mid-month, or far-month contracts depending on their horizon.
Example:
In April:
Near-month → April contract
Mid-month → May contract
Far-month → June contract
3. Price Convergence
As expiry approaches, the futures price tends to converge with the spot price of the underlying asset.
Example:
Spot Nifty = 22,200
Futures Nifty = 22,250 (one week before expiry)
By expiry → Futures price converges to 22,200
4. Triggers Rollover Activity
Traders with long-term views often roll over their positions near expiry:
Square off the current month’s contract
Take a new position in the next month’s contract
Analysts also track rollover data to gauge market sentiment.
5. Impacts Market Volatility and Liquidity
As expiry approaches:
Liquidity increases due to heavy volumes
Volatility rises as traders exit or roll positions
Arbitrage and hedging strategies are actively adjusted
What Happens If a Trader Doesn't Act Before Expiry?
The position is automatically settled
In stock futures, physical settlement may require delivering or receiving shares
Additional transaction charges, taxes, or delivery margins may apply
Example: How Expiry Works in Practice
A trader buys 1 lot of Reliance Futures (250 shares) at ₹2,800 in the April contract. Expiry is April 25.
Case 1: Trader exits before expiry
On April 24, they sell at ₹2,860
Profit = ₹60 × 250 = ₹15,000
Case 2: Trader does nothing
On April 25, position is auto-settled at closing price ₹2,790
Loss = ₹10 × 250 = ₹2,500
Common Trader Actions Near Expiry
Trader Action
Description
Squaring Off
Exit current position before expiry
Rollover
Close current contract and open next month’s contract
Letting Settle
Do nothing, let exchange auto-settle
Arbitrage/Spread Trade
Trade between two contracts (e.g., April & May) to capture price spread
Contract Lifecycle: Visual Timeline
Contract Month
Listing Date
Expiry Date
April
January last Thursday
April last Thursday
May
February last Thursday
May last Thursday
June
March last Thursday
June last Thursday
Each month, a new contract is introduced and the far-month contract expires three months later.
Price Behaviour Around Expiry
Futures often trade at a premium to spot in the early part of the contract
As expiry nears, premium narrows → Futures align with spot price
This convergence ensures fair hedging and settlement
Impact on Institutions and Retail Traders
Institutions: Use complex expiry strategies like calendar spreads, rollovers, and arbitrage
Retail traders: Must track expiry dates to avoid forced settlement or additional costs
Expiry Day: Known for sharp price moves and heavy intraday volumes
Key Takeaways
Expiry is the final trading day of a futures contract
All positions must be squared off, rolled over, or settled
Expiry drives price convergence, liquidity, and volatility
Failing to act can lead to forced settlement or delivery obligations