First Notice Day and Physical Delivery: What Happens When a Futures Contract Expires

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First notice day is a date every futures trader needs on their calendar. It marks the point when the delivery process for a physically settled contract can begin. If you’re holding a long position past first notice day, you could, at least in theory, be assigned delivery of the actual commodity. This guide explains first notice day, last trading day, what the delivery process actually involves, and why most traders close or roll positions well before either date.

Physical delivery vs cash settlement

Futures contracts end in one of two ways.

• Physically settled contracts end with the commodity changing hands. Crude oil, gold and grain futures are typically physically delivered.
• Cash-settled contracts, by contrast, end with a cash payment based on a reference price. No commodity moves. Stock index futures and many financial contracts work this way.

As the CFTC explains, a futures contract fixes the price and quantity at the time of agreement for delivery later. Physical delivery is how that promise is fulfilled. Even in physically settled markets, only a small share of contracts ever go to delivery; the rest are closed out or rolled beforehand.

Key dates in a contract’s life

Importantly, the order and timing of these dates vary by contract. For some markets, first notice day falls before last trading day; for others, it comes after. Always check the exchange’s contract specifications. CME Group explains expiration and settlement; use the exchange’s product calendar and rulebook for the exact month and delivery procedure.

What actually happens during delivery

Delivery is a formal, paperwork-driven process rather than a truck turning up at your door, but it is still something requires approved account arrangements, funding and knowledge of the contract rules. The typical sequence looks like this:

1. Notice of intent. On or after first notice day, a short position holder tells the clearing house it intends to deliver.
2. Assignment. The clearing house matches that notice to a long position, under the applicable assignment rules, and notifies that trader’s broker.
3. Delivery instrument. The seller transfers a warehouse receipt, shipping certificate or similar document representing the commodity at an approved location.
4. Payment. The buyer pays the full contract value, not just the margin deposit, on the delivery date.
5. Storage and fees. The new owner is responsible for storage charges, insurance and eventually moving or selling the commodity.

Being assigned means paying for the whole contract in cash and taking responsibility for the goods. That is why brokers step in long before it can happen to a retail account.

Which contracts are physically delivered?

Settlement can vary even within one sector. The exchange listing must identify the precise product code, size and settlement method. For example, CME distinguishes physically settled products from cash-settled futures in its physical delivery and cash settlement lesson. Do not infer the method from a generic name such as oil or gold. A smaller contract can have different rules from its standard-sized counterpart.

Why retail traders avoid delivery

Taking delivery of a full contract of crude oil or wheat requires storage, transport and paperwork that individuals don’t have. As a result, a broker may require clients to close or roll before an exchange delivery deadline. Check the actual account agreement rather than relying on a general rule. Some brokers will close positions automatically if you don’t act in time, at whatever price the market offers, and may charge a fee for doing so.

Check whether your broker changes margin requirements near expiry. A change can require additional cash or affect the timing of an exit; an older margin figure is not a promise of the current requirement.

How to roll a position

Rolling means closing your position in the expiring contract and opening the same position in a later month. For example, a trader long December gold might sell December and buy February before December’s first notice day.

The price difference between the two months affects your cost. In contango, the later month costs more; in backwardation, it costs less. Rolling can therefore add to or reduce your returns over time, which is one reason long-term futures positions behave differently from the spot price.

A worked example of the timeline

Suppose you buy one crude oil contract for a month that expires in six weeks. A sensible plan would be:

• Day of purchase: look up first notice day and last trading day for that exact contract month, and your broker’s own cut-off.
• One to two weeks before expiry: watch volume shift to the next month. Check volume, open interest and quoted spreads in both months; do not assume liquidity remains unchanged.
• Several days before the earliest deadline: roll or close. Do it while the expiring month is still liquid, not on the final afternoon.

Common mistakes

• Assuming expiry means last trading day. For many physically settled contracts, first notice day comes first and is the deadline that matters.
• Relying on the exchange date alone. Brokers often impose earlier deadlines, and theirs is the one that will close your position.
• Rolling at the last minute. Thin liquidity near expiry can make execution harder or more expensive.
• Forgetting the roll cost. A position carried through many rolls in a contango market can lose ground even when spot prices are flat.
• Holding a position through a weekend near a deadline. If first notice day is Monday, a Friday reminder is too late for many brokers.

A simple checklist

1. Look up first notice day and last trading day when you open any position.
2. Check your broker’s own deadline, which may be earlier than the exchange’s.
3. Decide in advance whether you’ll close or roll.
4. Watch liquidity. Trading usually shifts to the next contract month before expiry.
5. Set a calendar reminder several days ahead, not the day before.
6. Keep enough margin in the account to absorb any pre-expiry increase.

Does this affect ETF investors?

Not directly. Futures-based ETFs handle rolling themselves, usually on a set schedule. However, the cost of those rolls shows up in the fund’s returns over time, which is why a futures-based fund can drift from the spot price it is meant to track. The SEC’s Investor.gov guide to commodities defines futures and explains registration checks. For fund-specific roll mechanics, read the prospectus and the CFTC’s commodity-fund advisory. For more on how this plays out in energy, see our guide to crude oil trading basics.

Frequently asked questions

What happens if I hold a futures contract past first notice day?

If you’re long a physically settled contract, you could be assigned delivery. Your broker may restrict delivery or close positions earlier, sometimes with a fee. Verify its written policy rather than treating automatic closure as protection.

Is first notice day the same as expiry?

Not necessarily. Expiry usually refers to the last trading day, while first notice day marks the start of the delivery process. Their order depends on the contract.

Do cash-settled futures have a first notice day?

Generally no, since nothing is delivered. They settle in cash at expiry based on the final settlement price.

Putting the information to use

First notice day is the practical deadline for anyone long a physically settled futures contract. Know the date for every position you open, know your broker’s earlier cut-off, and roll or close while the market is still liquid. Delivery is a well-run process for commercial users, but for a retail trader it is something to plan around, not experience.

Trading futures involves substantial risk of loss. Past performance does not guarantee future results. This article is general information, not financial advice.