How Long Do Futures Contracts Last
Futures contracts are a popular investment option for traders who are looking for security and predictability when it comes to their assets. Essentially, a futures contract is an agreement between two parties to buy or sell an asset at a predetermined price and time in the future. But how long do these contracts typically last?
In general, futures contracts can last from a few months to several years. The length of a futures contract is determined by the contract`s delivery date, also known as the expiration date. This is the date by which the buyer or seller must complete the transaction.
For example, let`s say you purchase a futures contract for corn that expires in three months. This means that you agree to buy a certain amount of corn at a set price in three months` time. If you do not sell or buy the corn before the expiration date, you will be obligated to fulfill the contract.
Futures contracts typically have standardized expiration dates, which vary depending on the asset being traded. For example, agricultural products like corn and wheat often have quarterly expiration dates, while financial assets like currencies and index futures may have monthly or even weekly expiration dates.
It`s important to note that futures contracts can be bought or sold before the expiration date. This can be done through a process called closing out the contract or offsetting the position. This allows traders to exit a position early if they believe the market conditions have changed or if they have reached their desired profit margin.
In summary, futures contracts can last anywhere from a few months to several years, depending on the asset being traded and the expiration dates set for each contract. It`s important for traders to keep track of expiration dates and to understand their options for closing out a contract before it expires. With this knowledge, traders can make informed decisions and manage their investments effectively.