CONTRACT ROLLOVER & EXPIRATION
Plain English
Futures contracts expire. If you're still holding when expiration hits, you may get (or deliver) the physical commodity. Most traders 'roll' their position — close the expiring contract and open the next month's contract — before expiration to avoid delivery.
Going deeper
Futures expire on specific dates, after which physical delivery (or cash settlement) occurs. Most traders avoid delivery by rolling: selling the front-month contract and buying the next available month before First Notice Day (for physical commodities) or Last Trading Day. Roll timing: heavy commodity contracts (CL, GC) should be rolled 5-10 days before expiration. Financial futures (ES, ZN) can be rolled closer to expiration. The roll cost depends on contango or backwardation. Open interest typically migrates from front month to next month as expiration approaches — watch open interest shifts to find where liquidity lives. Exchange roll dates are published in advance.
Examples
ES Quarterly Roll
E-mini S&P 500 (ES) has quarterly expirations (March, June, September, December). Two weeks before the March contract expires, most liquidity shifts to June. Traders sell March and buy June simultaneously as a spread order to minimize slippage.
Crude Oil Roll Risk
CL expires monthly, and physical delivery occurs at Cushing, Oklahoma. In April 2020, traders caught in expiring CL contracts with no delivery capacity experienced an unprecedented event — crude oil went negative (-$37.63/barrel) as holders paid to get rid of contracts.