00:00Futures contracts do not last forever.
00:03A fixed date comes and your futures contract expires on that date.
00:10But a question arises here that what happens to your futures position on the day of expiry?
00:17Does the position get locked in automatically?
00:20Do you need to hold the position until expiry?
00:23And what if you want to continue your position till the next month?
00:29If you are learning futures trading then watch this video till the end.
00:33Because today we will understand futures expiry in a very basic and practical way through this video.
00:40First of all, let us understand what is expiry in futures.
00:44A futures contract is for a fixed period.
00:48Every futures contract has a specified expiry date.
00:52This means that this contract is not available for trading forever.
00:57Nifty futures contracts with different expiry months are available for borrowing.
01:05And each contract has its own fixed expiry.
01:09Now the most important question arises whether you need to hold the futures position till expiry.
01:17No, it's not like that at all
01:20If you have taken a buy position in futures, you can square off by selling it before expiry.
01:27Are
01:27And if you have taken a short position in futures, then you can enquire your position by buying.
01:36So remember, taking a position and holding it till expiry are not the same thing.
01:43You can also close the position before expiry as per your trading plan and risk management.
01:50Now the question arises that if the position remains open till expiry, then what will be the applicable terms of that futures contract at the time of expiry?
01:59Settlement rules apply
02:02The NAC equity derivatives framework involves the final settlement of futures positions and the open position of that contract after expiry.
02:11The position does not continue
02:13Therefore, it is not right to take this stock that once the expiry comes, my position will automatically get transferred to the next month's contract.
02:21I will go into
02:22This does not happen here. If you want to continue your position in the next expiry month, you will have to open a new contract.
02:31position in
02:32This process may need to be established; this is called broadly rollover here.
02:40That is, closing the position of the old expiry and building a new position in the contract of the next expiry.
02:49Now here is a very important thing, expiry and rollover are not the same thing.
02:56Expiry is the fixed end of a contract while rollover means
03:02The process of continuing your market position to the next expiry contract
03:07Now another common confusion among us is whether every futures contract expires on the same day.
03:16it occurs
03:16No, this is not the case; the expiry date depends on the contract and exchange specifications.
03:24For example, in the current NAC framework, Nifty 50 futures expire on the last Tuesday of the month.
03:32And if Tuesday is a trading holiday, then the previous trading day may expire.
03:37Therefore, before trading in any futures contract, be sure to check its current contract specifications and expiry date.
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03:47Now an important clarification, in this video we are understanding the basic concept of all futures expiry.
03:54We are not discussing this in detail.
03:58Complete calculation of the final settlement price
04:01detailed calculation of daily market to market settlement
04:05Detailed settlement rules for individual contracts
04:10Detailed calculation of roll over cost and calendar spread
04:15detailed procedures of physical settlement
04:19And we can understand these topics further in separate videos as per the need.
04:25So remember the most important things from today's video here.
04:30Number one: Every futures contract has an expiry.
04:34Number two, you don't have to hold the position until expiry.
04:39The position can be acquired off before expiry number three
04:45The same futures contract does not continue after expiry number four.
04:50Number five if the position needs to be continued into the next expiry contract
04:56So the need for rollover may be needed.
04:58And the most important futures contract is equal to note permanent position
05:04Understanding expiry is important because in futures trading
05:09Just understanding entry and exit is not enough, you should also know this
05:14When will your contract expire? What to do before expiry and if you want to continue the position.
05:23So what will be its process? Next time you look at a futures contract, don't just look at the price and margin.
05:32Also check the expiry date. If you want to learn F&O practically from zero then no chart.
05:39Please subscribe and follow finance
05:42In the next video we will cover another important concept of F&O with a practical example.
05:49Also, let me disclaim this content is for educational purposes only and it is not of any kind.
05:55Not financial investment or trading advice
05:58Futures and derivatives carry significant risk as the contract, specification, expiry dates and settlement rules can change over time.
06:07Are
06:07Be sure to check the current exchange rules and applicable contracts specifications before making any trading decisions.
06:14Thank you for watching, see you in the next video
