Expiry date
Also written Last trading day · Expiration date
The last trading day of a currency futures or options contract — for monthly contracts, two working days before the month's last business day; for weekly, every Friday — with trading stopping at 12.30 pm.
In plain language
Every exchange-traded currency contract has a day on which it stops trading and is settled. The workbook calls it the expiry date, also the last trading day or maturity date: the day on which trading ceases in the contract.
For Indian exchange-traded currency derivatives, the rules are:
- Monthly contracts — two working days prior to the last business day of the expiry month, at 12.30 pm.
- Weekly contracts — every Friday at 12.30 pm; if that Friday is a trading holiday, the previous trading day.
On the expiry day, the expiring contract trades only until 12.30 pm — not until the normal close of 5.00 pm (INR pairs) or 7.30 pm (cross-currency pairs).
After that, open positions are marked to the FBIL reference rate of that day and settled in cash on T+2.
How it works
Counting the two working days. Start from the last business day of the month and step back two working days. Saturdays, Sundays and holidays do not count.
Weekly and monthly together. INR currency futures run 11 serial weekly contracts, excluding the expiry week in which the monthly contract expires on a Friday, plus 12 serial monthly contracts. USDINR options have 11 serial weekly contracts on the same basis, alongside 3 serial monthly and 3 quarterly (March, June, September, December).
What happens at expiry (Chapter 7):
| Contract | At expiry |
|---|---|
| Futures | All positions marked to the final settlement price (FBIL reference rate) and settled in cash on T+2 |
| Options | All open long in-the-money contracts automatically exercised at the final settlement price and randomly assigned to shorts; cash settled on T+2 |
| Both | Open positions cease to exist after the expiration day |
Why hedgers must care (Chapter 5, section 5.7). If a real exposure matures on a different day from the contract's expiry, the hedge has a maturity mismatch and is imperfect — one of the listed limitations of exchange-traded currency derivatives.
A worked example
1. The workbook's April example. The last business day of April is Tuesday 30 April, with no holidays except weekends.
Last business day : Tuesday 30 April
1 working day back : Monday 29 April
2 working days back : Friday 26 April ← expiry date
The April USDINR monthly futures stop trading at 12.30 pm on Friday 26 April.
2. The specification table's example. If the last business day is a Thursday with no holiday, expiry is the Tuesday of that week.
3. A weekly contract with a holiday. Illustrative dates. A weekly USDINR option would expire on Friday 15 March, but that Friday is a trading holiday. Expiry moves to Thursday 14 March, 12.30 pm.
4. The rupee cost of a mismatch. Illustrative exporter and rates. Rao Exports receives USD 10,000 on 30 April but its April futures hedge (short 10 lots at 83.40) expired on 26 April at an FBIL rate of 83.10.
Futures gain at expiry = (83.40 − 83.10) × 10 × 1,000 = Rs 3,000
By 30 April, USDINR has fallen further to 82.90. The four days after expiry are unhedged:
Extra loss = (83.10 − 82.90) × 10,000 = Rs 2,000
Why NISM asks about it
Chapter 3, section 3.1.1 (Futures Terminology), defines expiry date with the April example; the contract specifications in sections 3.3 (futures) and 4.9 (options) give the weekly and monthly rules and the 12.30 pm cut-off. Chapter 7 covers final settlement at expiry and Chapter 5, section 5.7, the maturity-mismatch limitation. A Chapter 3 sample question asks for the last trading day of an EURINR monthly contract.
Common exam traps
- Two working days before the last business day — not the last business day itself, and not "last Thursday" (that is an equity derivatives convention).
- Trading stops at 12.30 pm on expiry day.
- Weekly expiry is Friday; if Friday is a holiday, the previous trading day, not the next.
- The weekly series excludes the expiry week of the monthly contract.
- Final settlement is T+2, while daily MTM is T+1.
- ITM long options are exercised automatically at expiry; the holder does not have to give notice.
Check yourself
1.Which of the following is the last trading day for an EURINR monthly futures contract?
- a)Two working days prior to the last business day of the expiry month
- b)One business day after the first business day of the expiry month
- c)Seven business days before the last business day of the expiry month
- d)The last Thursday of the contract month
Show the answer
Answer: (a) Two working days prior to the last business day of the expiry month
For all monthly currency futures contract the expiry date is two working days prior to the last business day of the expiry month at 12:30 PM.
The specification table repeats it: For monthly contract: Two working days prior to the last business day of the expiry month at 12:30 PM. For e.g. If last business day of the month is Thursday & there is no holiday, then expiry will be on Tuesday.
And the fuller worked example: if the last business day of April is 30th April (Tuesday), the expiry date for the April futures contract will be 26th April (Friday), assuming there are no holidays apart from Saturday and Sunday.
Count working days, not calendar days — the weekend does not count, which is why two working days back from Tuesday the 30th lands on Friday the 26th.
Option D borrows the equity derivatives convention, which does not apply here.
The weekly contracts follow a different rule: For weekly contract: Every Friday at 12:30 pm. If the Friday of the expiring week is a trading holiday, then the expiry day is the previous trading day.
Note that weekly contracts exist only for rupee pairs: INR based currency futures have weekly and monthly contracts but cross currency futures may have only monthly contracts.
Whatever the contract, expiry day closes early: on the expiry date the trading in contract ceases at 12:30 pm and not at the regular trading close of 5:00 pm or 7:30 pm.
The expiry date is also called the last trading day or maturity date of contract. It is the day on which trading ceases in the contract.
2.How does the futures price relate to the spot price of a currency pair?
- a)It can be higher or lower than spot, but converges with the spot price on the expiry date
- b)It is always higher than spot until expiry
- c)It must equal spot at all times, or arbitrage arises
- d)It is always lower than spot, since futures are cash settled
Show the answer
Answer: (a) It can be higher or lower than spot, but converges with the spot price on the expiry date
"Futures price: The current price of the specified futures contract. The future price can be higher or lower than the spot price. However, on the expiry date, the futures price converges with the spot price."
It is not always higher. Whether futures trade above or below spot depends on the interest rates: "The future value of a currency with a high interest rate is at a discount to the value of the currency with a low interest rate." The EURJPY example gives a forward (122.4837) below spot (123.4).
It need not equal spot before expiry. Interest rate parity says the two prices "incorporate any interest rate differentials between the two currencies" — a gap is the arbitrage-free outcome, not an arbitrage.
Cash settlement has nothing to do with the direction of the gap.
Convergence is also why the final settlement price comes from the spot market: "The Final settlement price / rate is mainly derived from the underlying/spot market."
3.Which of the following derivative contracts is traded only on exchanges?
- a)Currency futures
- b)Currency options
- c)Currency swaps
- d)FX swaps
Show the answer
Answer: (a) Currency futures
Futures alone is exchange-only.
The workbook's summary table gives the market for each generic derivative: Forward — OTC · Futures — Exchange · Swap — Mainly OTC · Option — OTC and Exchange.
And the definition builds the exchange in: Currency Futures means a standardized foreign exchange derivative contract traded on a recognized stock exchange to buy or sell one currency against another on a specified future date, at a price specified on the date of contract, but does not include a forward contract.
Option B is wrong because options trade in both venues — Options are traded both OTC as well as on Exchanges, as Chapter 1 also noted while listing where each Indian product trades.
Options C and D are both OTC. 'Foreign exchange swap' means an OTC derivative involving the actual exchange of two currencies (principal amount only)... and 'Currency swap' (also known as cross currency swap) means an OTC derivative which commits two counterparties to exchange streams of interest payments and/or principal amounts in different currencies.
What being exchange-traded brings: the futures contracts are standardized in terms of lot size, underlying, expiry date etc. Contracts are mainly settled in cash... Margins and mark to market are applicable for such contracts. Settlement guarantee is provided by the clearing corporation of the Exchanges.
And how that guarantee is created: the trade guarantee is provided by Clearing Corporation becoming a common party, called central counterparty (CCP), to the buyer and seller through the process of novation — so that Clearing Corporation becomes the buyer to the seller; and the seller to the buyer.
Where this is taught
- Series I · Chapter 3: Exchange Traded Currency Futuresintroduced here
- Series V-D · Chapter 19: Interest Rate Derivativesintroduced here
Related terms
- Basis riskThe risk left over after hedging, because the exposure and the contract used to hedge it do not move identically — in size, in expiry date, or in what they are written on.
- Currency futuresA standardised exchange-traded contract to buy or sell one currency against another on a future date at a price fixed today; in India, cash-settled in rupees, USD 1,000 a lot for USDINR.
- FBIL reference rateThe daily USD/INR (and EUR, GBP, JPY vs INR) benchmark rate published by Financial Benchmarks India Pvt Ltd around 1.30 pm; it is the final settlement price of INR currency futures and options.
- Final Settlement PriceThe price at which a commodity derivative is finally settled at expiry — a simple average of the polled spot prices of the expiry day and the two days before it.
- Contract cycleThe period over which a derivative contract trades, and the set of expiries available at once — for NSE stock and index futures, a three-month cycle of near, next and far months.
- RolloverCarrying a derivatives position past expiry by closing the expiring contract and opening the same position in the next series simultaneously — the only way to hold a view longer than one contract cycle.