F&O Learning. (Source: BloombergQuint)

BQLearning - F&O Series: What Is Expiry?

BQLearning is a special show that seeks to demystify financial markets, economic theories, legal processes and political structures.

In this series we explain how the most commonly used derivatives - futures and options, work in equity markets, the advantages they offer and the risks associated with them.

A contract is valid for a specific period of time. The monthly expiration of futures contracts is called expiry. Simply put, expiry is the date up to which the agreement is valid or the last date that a trader can hold the contract. Beyond this date, the trade ceases to exist and the trader cannot hold that contract anymore.

In this video, Amit Shah, technical and derivatives analyst of BOB Capital Markets explains how expiration works in the futures market, and how a trader should choose whether to buy a current, next or far month contract.

Watch the video here