Futures Expiry & Rollover: Meaning, Settlement & How It Works

Every futures contract has a fixed expiry date. A trader can close the position before that date, allow it to reach expiry or move the exposure into a later-month contract through a rollover.

What happens at expiry depends on the underlying asset. An open index futures position is settled in cash. An open individual-stock futures position can result in the receipt or delivery of the underlying shares.

Rollover does not extend the existing contract. The trader closes the expiring contract and enters a separate contract with a later expiry date. The new contract can have a different price, margin requirement, liquidity level and profit or loss reference.

This chapter explains futures expiry dates, final settlement, physical delivery of stock futures and how traders roll positions from one contract to another. It assumes you already understand the basic mechanics of a futures contract.

What Is Futures Expiry?

Futures expiry is the date on which a futures contract reaches the end of its trading life.

A futures contract is identified partly by its expiry date. For example, an August Nifty future and a September Nifty future are separate contracts even though both are based on the same index.

Once the August contract expires:

• Trading in that contract stops.
• Its final settlement price is determined.
• The final profit or loss is calculated.
• Any applicable delivery obligation is created.
• The expired position ceases to exist.

The position does not remain open indefinitely, and the broker does not automatically move it to the next contract.

Expiry, Settlement and Rollover Are Different

Expiry ends the current contract. Settlement completes its remaining obligations. Rollover creates exposure through a different contract.

When Do Futures Contracts Expire in India?

For NSE equity derivatives, index futures and individual-stock futures generally expire on the last Tuesday of their expiry month.

If the last Tuesday is a trading holiday, the contract expires on the previous trading day.

For example, if the last Tuesday of a month is a market holiday, expiry may move to Monday or another preceding trading day. Traders should confirm the date displayed in the live contract specification instead of relying only on a calendar assumption.

Futures Have Monthly Expiries

Unlike certain index options that may have weekly contracts, equity futures generally trade through monthly expiry contracts.

At a given time, NSE normally provides three futures expiries:

When the near-month contract expires, a new far-month contract is ordinarily introduced on the following trading day.

The expiry date, lot size and underlying are essential F&O contract terms. Traders should verify them before placing an order because selecting the wrong expiry creates exposure through a different contract.

What Can a Trader Do Before Futures Expiry?

A trader holding a futures position has three broad choices.

1. Square Off the Position

The trader places an opposite order in the same contract and quantity.

A long position is closed by selling the same futures contract.

A short position is closed by buying the same futures contract.

Once the order is completely executed, there is no open quantity left for expiry settlement.

2. Hold the Position Until Expiry

If the position remains open after trading ends on the expiry date, it enters final settlement.

The result depends on the contract:

Index futures are settled in cash.

Individual-stock futures create physical delivery obligations.

3. Roll the Position Forward

The trader closes the expiring contract and opens a similar position in a later-month contract.

For example, a long August Nifty futures position can be rolled by:

Selling the August Nifty future.

Buying the September Nifty future.

The two orders may be placed separately or through an available spread-order facility.

What Happens to Futures on the Expiry Day?

At the close of trading, all remaining positions in the expiring contract are marked to the contract’s final settlement price.

The final profit or loss is calculated using:

The trade price, if the position was opened on the expiry day

The previous daily settlement price, if the position was carried forward

The final settlement price of the expiring contract

The position quantity and direction

For a long position:

Final settlement P&L = (Final settlement price - Previous reference price) x Total quantity

For a short position:

Final settlement P&L = (Previous reference price - Final settlement price) x Total quantity

This is the final application of the mark-to-market settlement process. Earlier daily movements have already been settled, so the original entry price is not reused for the final day’s settlement calculation.

An Expired Futures Position Does Not Remain in the Account

After final settlement, the expired contract ceases to exist.

A trader may still see:

• A final MTM debit or credit
• A realised profit or loss
• Charges and taxes
• A funds obligation
• A stock-delivery obligation
• A newly opened later-month position from a rollover

These entries do not mean that the expired futures contract remains active.

Index Futures vs Stock Futures at Expiry

The most important expiry distinction is between an index future and an individual-stock future.

The futures contract ends in both cases. The difference is how the underlying obligation is discharged.

How Are Index Futures Settled at Expiry?

Index futures are settled in cash because an index is a calculated value, not a security that can be transferred into a demat account.

A trader cannot deliver one Nifty 50 index. Therefore, the final profit or loss is settled through funds.

Final Settlement Price for Index Futures

The final settlement price of an index futures contract is based on the closing value of the relevant underlying index on the contract’s final trading day, unless the exchange prescribes another methodology.

This differs from the normal daily settlement price of a futures contract, which is generally based on the final 30-minute volume-weighted average price of the futures contract itself.

Index Futures Expiry Example

Assume Priya holds one long Nifty futures contract with:

Previous daily settlement price: 25,100

Expiry-day Nifty closing value: 25,240

Lot size: 65

Number of lots: 1

Final price movement:

25,240 - 25,100 = 140 points

Final settlement profit:

140 x 65 = ₹9,100

Priya receives a final settlement credit of ₹9,100, subject to the broker’s processing and applicable charges.

The Nifty futures contract then ceases to exist. Priya does not receive shares of the companies included in the Nifty 50.

Index Futures Loss Example

If the final settlement price had been 24,980:

24,980 - 25,100 = -120 points

Final settlement loss:

-120 x 65 = -₹7,800

The ₹7,800 is a settlement obligation. Expiry does not remove or forgive the loss.

How Are Stock Futures Settled at Expiry?

Individual-stock futures are physically settled. An open stock futures position creates an obligation involving the underlying shares.

The direction of that obligation depends on whether the position is long or short.

The quantity is:

Delivery quantity = Market lot x Number of open futures contracts

The applicable long or short futures position determines whether shares must be received or delivered.

Final Settlement Price for Stock Futures

The final settlement price for a stock futures contract is based on the last 30-minute volume-weighted average price of the underlying security across exchanges on the final trading day, unless another price is prescribed.

This is based on the underlying share, not merely the last traded price displayed for the futures contract.

Long Stock Futures Expiry Example

Assume Priya holds one long stock futures contract:

Previous daily settlement price: ₹990

Final settlement price: ₹1,010

Lot size: 500 shares

Number of contracts: 1

Final MTM profit:

(₹1,010 - ₹990) x 500 = ₹10,000

Physical settlement value:

₹1,010 x 500 = ₹5,05,000

The position produces two connected outcomes:

The final futures MTM is settled.

Priya must provide the required funds and receives 500 shares.

Once delivered, those shares are ordinary cash-market holdings in the demat account. Their subsequent value changes according to the share price, not the expired futures contract.

Short Stock Futures Expiry Example

Assume Arjun holds one short stock future with:

Final settlement price: ₹1,010

Lot size: 500 shares

Open contracts: 1

Arjun must deliver:

500 shares

The corresponding delivery value is:

₹1,010 x 500 = ₹5,05,000

If Arjun does not have the required shares available for delivery, a shortage, auction or close-out process may apply. The resulting cost can be substantially different from the price visible when the market closed.

Cash in the trading account does not necessarily replace a short position’s obligation to deliver shares.

Final MTM and Physical Delivery Are Not the Same Obligation

Stock futures expiry can involve both:

Cash settlement of the final futures price movement

Physical settlement of the underlying shares

Suppose a long stock future was reset to ₹990 after the previous day’s MTM and expires at ₹1,010.

The final ₹10,000 MTM profit in the earlier example accounts for the ₹20 price movement. The separate ₹5,05,000 delivery value is the amount associated with receiving 500 shares at the final settlement price.

The trader should therefore check both the funds ledger and the delivery obligation. Looking only at the displayed futures P&L can hide the much larger funding requirement connected with physical settlement.

Does Physical Settlement Mean You Bought Shares Normally?

The final result may place shares in the demat account, but entering a stock future is not the same as placing an ordinary cash-market delivery order.

Important differences include:

• The futures position initially requires margin rather than the entire contract value.
• Profit and loss is settled daily through MTM.
• The contract has a fixed lot size and expiry.
• Delivery is compulsory if the stock future remains open at expiry.
• Expiry-related margins can increase before settlement.
• Charges and tax treatment can differ.

Once the shares have been received through settlement, they become cash-market holdings. The distinction between the two markets is explained in F&O vs the cash market.

Why Can Margin Increase Before Stock Futures Expiry?

A stock futures position may initially be held using SPAN, Extreme Loss Margin and other applicable margin components.

As expiry approaches, the same position can create an obligation for the full value of the shares. The clearing framework therefore introduces delivery margin before expiry.

Under the current framework, delivery margin begins four trading days before expiry and increases progressively.

Here, E means the expiry day.

These percentages apply to the computed delivery margin, not directly to the entire futures contract value. A broker may also apply stricter risk checks or square-off deadlines.

This expiry-related requirement is separate from the regular SPAN and exposure margin.

Why a Broker May Close a Stock Futures Position Early

A broker may close or restrict an expiring position when:

• The account lacks sufficient funds for delivery.
• A short position lacks the required shares.
• Delivery margin is insufficient.
• The contract becomes illiquid.
• The broker’s physical-settlement deadline has passed.
• The client agreement permits risk-based square-off.

A broker square-off is not guaranteed to occur at the trader’s preferred price. Traders should check the broker’s expiry policy before the final trading session.

What Is Futures Rollover?

Futures rollover is the process of closing a position in an expiring futures contract and opening a corresponding position in a later-expiry contract.

It is commonly used when a trader wants to maintain market exposure beyond the current contract’s expiry date.

A rollover consists of two separate trades:

• An exit from the near-month contract
• An entry into the mid-month or far-month contract
• The position direction is generally kept the same, but the expiry date and entry price change.

How to Roll a Long Futures Position

Suppose a trader is long one August Nifty future and wants to continue the bullish exposure into September.

The rollover requires:

• Sell one August Nifty future.
• Buy one September Nifty future.
• After execution:
• The August position is closed.
• A new September long position is created.
• The September purchase price becomes the new position’s reference.
• The September contract requires its own margin.

How to Roll a Short Futures Position

Suppose a trader is short one August stock future and wants to continue the bearish exposure into September.

The rollover requires:

• Buy one August stock future.
• Sell one September stock future.
• After execution:
• The August short position is closed.
• A new September short position is created.

Long and Short Rollover Orders

Using the wrong order direction can increase the position instead of rolling it.

Complete Futures Rollover Example

Assume Priya holds one long Nifty August future:

Original August entry: 24,800

Current August price: 25,100

September futures price: 25,180

Lot size: 65

Priya rolls the position by:

Selling August at 25,100

Buying September at 25,180

Result on the Expiring Contract

Gross profit on August:

(25,100 - 24,800) x 65 = ₹19,500

This closes the August position.

New Contract Entry

The new September position begins at:

25,180

Future profit or loss on the rolled position will be measured from this new contract price, subject to daily MTM settlement.

Rollover Spread

The difference between the two contracts is:

25,180 - 25,100 = 80 points

For one 65-unit lot:

80 x 65 = ₹5,200

This ₹5,200 is the notional price difference between the expiries. It is not necessarily posted as a separate ₹5,200 fee or immediate loss. It is embedded in the higher entry price of the September contract.

Priya also incurs the applicable brokerage, taxes, bid-ask spread and slippage on the closing and opening trades.

What Is the Rollover Spread?

The rollover spread, also called the calendar spread, is the price difference between two futures contracts on the same underlying.

A common calculation is:

Calendar spread = Later-month futures price - Near-month futures price

Example:

Near-month future: 25,100

Later-month future: 25,180

Calendar spread = 25,180 - 25,100 = 80 points

If the later-month contract trades higher, the spread is positive. If it trades lower, the spread is negative.

A Positive Spread Is Not Automatically a Loss

The economic effect depends on the position direction.

A long trader closes the lower-priced near contract and enters the higher-priced later contract.

A short trader closes the lower-priced near contract and sells the higher-priced later contract.

The spread may reflect financing cost, expected dividends, demand, supply and time remaining until expiry. It should not be interpreted as a standalone bullish or bearish signal.

Why Do Different Expiry Contracts Trade at Different Prices?

Two futures contracts on the same underlying can trade at different prices because they have different remaining durations.

Factors affecting the price difference include:

• Financing or cost of carry
• Expected dividends before expiry
• Interest rates
• Time remaining to settlement
• Demand for long and short exposure
• Hedging activity
• Liquidity
• Market expectations

As the near-month contract approaches expiry, its price generally moves closer to the underlying spot value. This process is called convergence.

However, convergence does not mean that the later-month contract must trade at the same price. It still has additional time remaining until its own expiry.

Is Rollover Automatic?

No. Futures rollover is not automatic.

The later-month contract is a separate exchange-traded instrument. It has its own:

• Contract identifier
• Expiry date
• Market price
• Order book
• Open interest
• Margin requirement
• Daily settlement history

If a trader does nothing, the existing contract goes through expiry settlement. It is not converted into the next-month contract.

Stop-loss orders, target orders and alerts attached to the expiring contract also do not automatically transfer to the new contract.

Can Futures Be Rolled After Expiry?

No. Once the contract has expired, it can no longer be traded.

A trader can open a later-month position after expiry, but that is a new trade rather than a rollover of an existing open contract.

To complete a rollover, the closing and opening transactions must be executed while the expiring contract is still available for trading.

Should Both Rollover Legs Be Executed Together?

Executing both legs together can reduce the time during which the trader is exposed to only one side of the rollover.

Some platforms provide calendar-spread or rollover order facilities. The exact execution behaviour depends on the exchange order type and broker platform.

When the legs are placed separately, several outcomes are possible:

• The first leg executes but the second is rejected.
• The second leg executes at a worse price.
• Only part of one order executes.
• The market moves between the two trades.
• The quantities of the two contracts do not match.

After placing the orders, verify the actual executed quantities rather than relying on the intended order quantities.

How Rollover Affects Margin

During a rollover, both contracts may remain open temporarily. The portfolio can therefore contain an offsetting calendar-spread position.

The clearing system may recognise a margin benefit because the two positions offset much of the underlying directional risk. However, the benefit does not remove all risk because the price difference between the contracts can change.

Important points include:

• The margin benefit depends on both legs being present and eligible.
• Partial execution can leave a larger unhedged requirement.
• Closing one leg removes the spread benefit.
• The later-month contract can have a different standalone margin.
• A broker can apply additional margin above the exchange minimum.

For index futures, the current exchange framework removes calendar-spread treatment for the expiring position on the expiry day. This can increase required margin even if both legs are still visible in the account.

Does Rollover Carry Forward the Original Profit or Loss?

No. The profit or loss on the expiring contract is realised or settled when that contract is closed.

The later-month position begins with a new entry price.

Suppose:

August long entry: 24,800

August exit: 25,100

September entry: 25,180

The August contract has a gross profit of ₹19,500 for one 65-unit lot. The September contract starts at 25,180.

If September later rises to 25,300:

September profit = (25,300 - 25,180) x 65 = ₹7,800

The broker may provide a combined strategy view, but the two contracts remain separate trades for execution, settlement and record-keeping.

What Is Rollover Percentage?

Rollover percentage is a market statistic used to estimate how much open interest appears to be moving from an expiring contract into later-month contracts.

A simplified version compares later-month open interest with total relevant open interest around expiry.

However, the calculation methodology can vary across data providers. The statistic also cannot prove that every later-month position came from a rollover.

An increase in later-month open interest may represent:

• Existing positions being rolled
• New long positions
• New short positions
• Hedging activity
• Arbitrage positions
• Calendar-spread trades

A high rollover percentage does not independently reveal whether traders are bullish or bearish. Price, open-interest direction, the rollover spread and broader market context must be interpreted together.

Expiry vs Rollover Example for Stock Futures

Assume a trader is long one stock future representing 500 shares.

If the Trader Holds Until Expiry

The trader must provide the required funds and receive 500 shares through physical settlement.

If the Trader Squares Off

The trader sells the same expiring future before the cut-off. If the complete quantity executes, no futures delivery obligation remains from that position.

If the Trader Rolls Over

The trader:

Sells the expiring stock future.

Buys the later-month stock future.

The immediate physical delivery obligation from the expiring future is avoided, but the later-month future creates a new leveraged obligation with its own expiry date.

Rollover postpones the expiry date of the market exposure. It does not remove the underlying risk.

Costs Connected With Futures Rollover

A rollover can involve several costs or economic effects:

• Price difference between the two expiries
• Bid-ask spread on the expiring contract
• Bid-ask spread on the later-month contract
• Slippage during execution
• Brokerage
• Exchange and regulatory charges
• Securities Transaction Tax
• Stamp duty
• GST on applicable charges
• Different margin requirement for the new contract
• Because a rollover involves closing and opening trades, charges can apply to both sides as relevant.

For physically settled stock derivatives, delivery-based charges and taxes can apply if the position is allowed to expire. Current rates should be checked before calculating the final cost.

Common Futures Expiry and Rollover Mistakes

• Assuming futures expire worthless: Futures positions are settled. “Worthless expiry” is mainly associated with out-of-the-money options, not open futures.
• Expecting an automatic rollover: The later-month contract must be entered through a separate trade.
• Confusing index and stock settlement: Index futures settle in cash, while stock futures create share-delivery obligations.
• Ignoring the full delivery value: Margin blocked before expiry can be much smaller than the funds needed to receive shares.
• Not arranging shares for a short position: An open short stock future can require delivery of the complete lot quantity.
• Using the futures LTP as final settlement price: The prescribed final settlement methodology uses the underlying index or security.
• Using the original entry for final-day MTM: Earlier price movements have already been settled through daily MTM.
• Rolling unequal quantities: Closing two lots and opening one lot changes the exposure instead of fully rolling it.
• Ignoring partial execution: An unfilled leg can leave an unintended outright position.
• Assuming orders transfer: Stop-loss and target orders on the old contract do not automatically attach to the new contract.
• Ignoring higher expiry margin: Delivery and calendar-spread margin treatment can change close to expiry.
• Waiting for a broker square-off: The broker’s action, timing and execution price are not guaranteed.

Futures Expiry Checklist

Before an equity futures contract expires, verify:

1. The exact contract and expiry date
2. Whether the position is an index future or stock future
3. Whether the position is long or short
4. The open lot quantity
5. The current applicable lot size
6. Whether any exit order remains partially filled
7. The broker’s expiry square-off deadline
8. The final settlement method
9. The funds needed for a long stock-delivery obligation
10. The shares needed for a short stock-delivery obligation
11. The delivery and standalone margin requirements
12. The liquidity of the later-month contract
13. The rollover spread and expected trading charges
14. Whether the new position’s stop-loss and target orders were placed
15. The final ledger, demat and settlement entries after expiry