Module 9 · Lesson 3 of 12 · Futures · About 5 minutes
Futures Expiration, Rollover and Continuous Charts
On this page
Before you read: Futures Margin and Daily Mark-to-Market Explained
What you will learn
- How futures contract months and their one-letter month codes work.
- What happens as a contract approaches expiration, and what a roll is.
- How continuous charts stitch months together, and why back-adjusted and unadjusted charts can show different prices for the same day.
Why do futures expire at all?
If a stock can be held forever, why does a futures contract have an end date?
A futures contract is an agreement about a specific future date. When that date arrives, the agreement has to be completed, either by a cash payment based on a final settlement value or by delivery of the underlying. So each contract month has a last trading day. Traders who want to keep the same exposure past that day close the expiring contract and open the same position in a later month. That pair of trades is the roll.
How are months labeled?
How can a symbol tell you which month a contract belongs to?
Exchanges use a standard set of one-letter codes for contract months:
| Month | Code | Month | Code |
|---|---|---|---|
| January | F | July | N |
| February | G | August | Q |
| March | H | September | U |
| April | J | October | V |
| May | K | November | X |
| June | M | December | Z |
A full contract symbol combines the product root, the month code and the year, often as one or two digits. For example, a March contract of a product with root “XYZ” in 2027 might appear as XYZH7 or XYZH27, depending on the platform. Equity index futures list the quarterly cycle of March, June, September and December (H, M, U, Z). Many commodities list every month, though trading activity usually concentrates in a few of them.
What does a roll look like on the screen?
Where does trading activity go in the days before a contract expires?
Most activity sits in the nearest active month, often called the front month. As expiration approaches, traders move to the next month and volume and open interest shift with them. For quarterly CME equity index contracts, this shift is usually concentrated in the days before expiration. CME publishes a customary roll date on the Monday before the third-Friday expiration, though positions can be rolled at any time. Platforms and data vendors each choose a rule for when their “front month” display switches to the next contract, so two platforms can switch on different days.
The two months normally trade at different prices. The gap between them is called the calendar spread, and it reflects carrying costs such as interest rates, dividends for index futures, or storage for physical commodities. When you roll, you close at one price and reopen at another. That difference is not a gain or loss in itself, because the contracts are different instruments, but it does change the numbers you see on a chart.
Rollover diagram
Illustrative diagram constructed for teaching. Not real market data.
The diagram shows fictional daily volume in an expiring month fading while volume in the next month rises, with the roll window and the expiration date marked. It is constructed for teaching and is not real market data.
How do continuous charts handle the gap?
If you join two contracts with different prices end to end, what happens at the seam?
A continuous chart joins successive contract months into one long series so you can study history across many expirations. There are two common approaches:
- Unadjusted (spliced). Each segment shows the actual prices traded in that month. At every roll there is a jump equal to the spread between months. That jump never traded and is not a real move.
- Back-adjusted. Older segments are shifted up or down by the roll gap so the seams disappear. The shape of past moves is preserved, but older prices on the chart no longer match the prices that actually traded at the time, and very old levels can even differ widely from history.
Neither is wrong. They answer different questions. If you mark a level from months ago, it matters which kind of chart you used, because the same moment can show different prices on the two.
What this does not tell you about expiration
- Exact last trading days and times differ by product and are defined in each contract’s rules. Check the exchange’s calendar.
- Brokers may require you to close or roll positions earlier than the exchange deadline, especially for physically delivered products.
- Back-adjusted levels are not prices that traded. Treat old levels on a continuous chart with care.
- Calendar spreads change with interest rates and other carrying costs. This lesson does not explain how to trade them.
Method in Practice: a roll checklist, worked through
Fictional example. John, Harbor Index futures, the prices, times, costs and results are all invented for teaching. This shows how a written plan can be built and tested. It is not a recommendation, and nothing here says how often this idea works.
Try it on a real chart. Test this idea yourself on past sessions with bar replay. Keep your own count, including the days with no trade.
The idea. Before expiry, trading moves to the next contract month, and charts and levels can change when it does (this lesson). John's roll checklist decides when he switches, and checks his levels come from the right contract.
John's roll checklist
- Switch when the next month's volume beats the front month's for 2 days in a row, or 8 trading days before the last trading day, whichever comes first
- Re-mark the prior value area, high and low from the new contract
- Note the price gap between the two months
- No new trades on the switch day itself
Three outcomes (adapted)
-
Smooth roll: the checklist ran on day 2 of higher volume. Levels re-marked. No missed steps
-
Caught error: the chart still showed the old month. Its value area low was 0.60 different. Step 2 caught it before the open
-
No trade: the switch day. Step 4 kept him out
Show the full checklist record
| Day | Volume (front / next) | Checklist | Result |
|---|---|---|---|
| Mon | 410k / 380k | Watch | Trades the front month |
| Tue | 360k / 450k | Day 1 of next higher | Trades the front month |
| Wed | 300k / 520k | Day 2: switch. No new trades today (step 4) | No trade |
| Thu | — | Step 2: the chart still showed the front month. Its value area low 101.20 vs the new month's 101.80, a 0.60 gap. Re-marked | Plan runs on the new contract |
Test it yourself
- Find the last trading day and the roll pattern for your contract in its specifications.
- Compare a level from the old and new months on the same day. Note the difference.
- Replay a roll week. Check which contract your chart was showing each day.
Where it breaks
- Volume is split across months around the roll, which distorts volume readings (Trading Volume Explained: Volume vs Open Interest).
- Continuous charts adjust prices in different ways.
- Roll dates differ by product.
Reflection question: Which contract month is your chart showing right now, and how do you know?
Check yourself
- What does the code “U” mean in a futures symbol? Hint: look at the month table.
- Why does an unadjusted continuous chart show a jump at each roll? Hint: two different contracts at two different prices.
- You marked a level on a back-adjusted chart from a year ago. Would that price have traded at the time? Hint: what did back-adjusting do to old segments?
Reflect on your own process
- Does your written process say which continuous-chart setting you use, and do you note it next to every level you mark?
- Where in your calendar or checklist do you record each contract's last trading day and your broker's earlier cutoff?
- How would you check whether a historical level on your chart is a price that actually traded?
- Which contract month is your chart showing right now, and how do you know?