Contract Front Month Rule

N

Navigator

Does anyone know what the definitive rule is on which contract becomes the front month for CME equity index futures?

I know that the March contract becomes the front month next Thursday, Dec 13th but I wonder if there is some logic to figuring this out.

Thanks in advance for your answer.
 
expiration is the AM of the 3rd friday of every month - effectively making the 3rd thursday the last day of trading. if I am not mistaken, the front month changes one week before.
 
To add to def's post, the contract months are March, June September and December (not monthly like stock options). I have never paid attention to the exact day of the change, I just followed the volume...one day the old contract is the most liquid, the next day it switches to the new contract. As long as you are switching to the new contract around the time the volume changes you will be ok, even if a day or two off.


Kirk
 
Thanks def.

So it's the second Thursday of the expiration Month with no exceptions? I thought I had seen the rollover on a Wednesday before... would that have been if the expiration Friday was a trading holiday?
 
navigator,
war eagle is correct, trade where the volume is. you can always roll your open positions forward if there is liquidity. depending on one's position, what funds do is to start rolling forward more than a week or two ahead of the roll over and when they are done rolling they trade the outer month. it really doesn't matter what is called the front month. What matters is where there is liquidity and a decent spread.

as for a holiday, expiration is technically the saturday following the third friday of the month. In other words, if friday is a holiday expiration would be thursday.
 
def, thanks again for your input.

Liquitity is the reason I'm asking for the rule for the front month. I have a daytrading system where I'm putting in my stop order at the open... I keep having to ask my broker around this time of the month to make sure I place my order for the front month...

I don't mean to beat this to death but what if the Thursday before the second Friday was a holiday. Would we roll on Wednesday or Friday?
 
why not be specific with your order and specify a month. liquidity in the expiring month will not dry up on the first day of the roll and you should thus be ok with your stop. alternatively, be safe and do it a day early. the spread market will keep both months in line and if trading minis should be liquid enough that you do not get a bad fill.

as for your question, i believe it would be wednesday. think of it as T-1 where the 1 is 1 business day.
 
def, I think I got it. I must be a slow learner, but I'd rather beat it to death here then miss rolling to the new month when trading...

Obviously I do have to specify the contract month for my order... my stop price would be way different depending on which month I trade. I don't know what contract you're talking about but from my experience, once the roll begins, the volume dries up quite quickly on the expiring month contract.
 
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