expiration on futures

L

lars22

I have been trading for 1 year on stocks and stock options. I decided to try futures. I read a few books on it. However, I'm still confused. When an futures contract expires, like say the ES on march, does that mean that it just expires worthless like a stock option? Or that it will be sold on that day at whatever price it is?
Also, i tried buying SSF on IB, and I keep getting the message, "could not value the contract at this time". thx for any help
 
If the contract expires and you are still holding it, then your clearing firm will debit or credit your account for the value of the contract at the settlement price on expiration. So if you are long 1 ES at 1230.00 and it settled at 1280 on expiration day (3rd Friday of December, March, June and September), then your clearing firm will credit your account for 50 ES Points x $25 per point = $1,250. The contract is binding and does not expire worthless like options do. It is not sold on the expiration day, it is "settled" with the exchange's clearing corporation.
 
but do I still own my original contract of 1230, or does it go back to my account directly? Or that amount just disappears? or maybe my 1230 position is now 1280 plus the 50points profit i already made?
 
In this example, are we talking about a futures contract that you went long at 1230 or a futures options contract (a 1230 call)?
 
Quote from ktm:

In this example, are we talking about a futures contract that you went long at 1230 or a futures options contract (a 1230 call)?
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Just a regular long futures contract that I bought at 1230, that at expiration date is at 1280, im wondering what happens when it arrives at expiration. He told me the difference (50 points=1250) is settled in my account, but thats only the profit. What happens to my original contract at 1230? Does that just dissapear and I get only the profit(or loss), or that amount goes back to my account as well?
thx
 
You will find all of you answers here:

http://www.cme.com/edu/course/resources/brochures651.html

Quote from lars22:

Just a regular long futures contract that I bought at 1230, that at expiration date is at 1280, im wondering what happens when it arrives at expiration. He told me the difference (50 points=1250) is settled in my account, but thats only the profit. What happens to my original contract at 1230? Does that just dissapear and I get only the profit(or loss), or that amount goes back to my account as well?
thx
More...
 
Quote from lars22:

Just a regular long futures contract that I bought at 1230, that at expiration date is at 1280, im wondering what happens when it arrives at expiration. He told me the difference (50 points=1250) is settled in my account, but thats only the profit. What happens to my original contract at 1230? Does that just dissapear and I get only the profit(or loss), or that amount goes back to my account as well?
thx
More...
Your long contract is matched with an available inventory of short contracts by the clearing corporation. Once your contract has expired in futures, you take delivery per the settlement instructions depending on the contract and you no longer own that contract. Each contract has its own rules for settlement and delivery. Never trade a futures contract without thoroughly understanding its contract specs including trading hours, holiday schedule, expiration/roll dates and settlement procedures. Settlement is expensive in most big contracts, so your clearing firm will likely take you out of the market prior to settlement. Check with them.
 
The others have good advice about learning...but to answer your question.

In this situation, it is probably fine to forget that there is a contract. Effectively, there is no obligation or right with cash settled index futures contracts. When you go long at 1230, you are effectively taking a ride on the index. On this ride, you pay for every point or get credit as the index moves. For you, settlement just means you have to get out and grab a ride on the next expiration contract. Your account balance is updated as the contract moves, so your 50 points will have accumulated over the period of the move.
 
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