Futures expiration. How to properly manage the position?

Beginners in trading fall into a new, unknown world with their own rules and laws. A huge amount of incomprehensible information, terms, models, even scientists will become confused. Any strategy on the market is to anticipate future or often recurring events and earn money on it. Today, let's talk about what futures expiration is and how you can increase your investments on this. The article will be useful not only for beginners, but for experienced traders, regardless of the site on which you trade, because the mechanism is the same everywhere.

Definition, terminology and terms

The word "expiration" is formed from the English expiration - the completion of a certain period / term. In application to the exchange means the end of trade in a particular contract. Expetition of futures is divided into two types: settlement and staged. When using them, a specific date is selected, on which all participants will need to fulfill their obligations. You can see it in the specification of any contract. For example, the expiration of futures for Mos. Exchange on the most popular instrument RTS comes every quarter.

How expiration can affect trade

When the end date of the contract comes, price movements begin to make sharp leaps both in the direction of sellers and buyers. This is due to the fact that in this period there is a strong struggle between them. Particular pressure on the price in this period is due to several factors: the volume and the ratio between the shares and the market of production tools, the distribution of instruments among all participants and the influence of market makers. As a result of these data, a high volume, volatility is formed in the market, and the one who remains the winner will indicate the further direction of the movement.

Why should a novice know what futures expiration is?

For example, take the popular RTS index. His contract is changed 4 times a year, i.e. quarterly. The calendar year begins with the March futures, as its end date falls on the end of March. Each month and year are marked in terminals based on 3 data. First comes the designation RI (for RTS), then the month (H - March, M - June, U - September, Z - December) and ends with the number 7 (the last digit of the year 2017). As a result, one name of the futures (RIH7) already carries the basic information. It should be noted that at any time several instruments are traded on the market, as futures expiration is six months, but the active phase begins three months before the end of the period.

Surely you have a question: what is done with the contract after its termination? The exchange simply closes it at the current market price and the profit or loss outputs to the trader's account. Therefore, even if you did not close your contract yourself, there's nothing wrong with that, but it's better to move on to a new contract in advance. You can do it yourself in the terminal settings.

Brent crude oil futures

In connection with the great popularity of oil trading, we want to tell you about how the brent futures expire, what it is and how it can be earned. When trading this instrument, it is first of all necessary to take into account factors that affect its value in the near future. This includes: the rate of inflation, the state of the fuel base for 5-10 years, the possible impact of new technologies and, of course, geopolitics. It should be noted that trading in oil futures is different from trading instruments on the commodity exchange on the following items:

1) do not need to think about how to transport and where to store;

2) until the expiration time, the contract will be resold;

3) you can earn or lose only on the price difference.

If you still decide to trade this tool, then you need to study in more detail all of its elements and the factors influencing it.