Futures & Market Research Glossary

First Notice Day (FND) is the first day on which a delivery notice may be issued in the delivery process for a physically deliverable futures contract under the applicable exchange rules. It is a formal contract milestone, not necessarily the date on which the underlying commodity or security changes hands and, in some contracts, not even the first point at which a long position can become operationally committed to the delivery process.

Notice, assignment and delivery can occur on different days

A short position initiates delivery according to the contract's rules, normally through its clearing firm. The clearinghouse typically operates at the clearing-member level rather than selecting an individual customer directly. Under CBOT Rule 713, for example, the Clearing House assigns deliveries to clearing members carrying eligible long contracts, and a clearing member receiving a delivery notice assigns the delivery to the oldest open contracts on its books. The precise customer-level allocation process can nevertheless depend on the product and clearing firm's applicable procedures.

Treasury futures show why First Notice Day should not be treated automatically as the first instant of assignment risk. In CME's Treasury delivery process, the short clearing firm declares its intention to deliver on Intention Day, also called Position Day for the long side. CME Clearing then matches long and short clearing firms that evening. First Notice Day follows on the next business day, when the invoice and details of the Treasury securities to be delivered enter the process. Delivery itself occurs later. Notice, matching and transfer are therefore separate events.

The date and sequence are contract-specific

First Notice Day must be taken from the current contract specification or exchange rulebook. For CME Treasury futures, it is the business day before the first business day of the delivery month, whereas ICE FCOJ-A futures specify the first business day of the expiring month. Other physically delivered contracts use different notice periods and procedures. Cash-settled futures do not use a physical-delivery notice process; their final settlement follows the applicable cash-settlement rules.

For a trader who does not intend to take delivery, the important date is therefore the earliest point at which the position can enter the applicable contract's delivery workflow. General guidance to exit a long position before FND is useful for many physically delivered contracts, but it should not replace the product's actual rules. A robust roll or delivery-risk calendar may need to distinguish First Position or Intention Day, First Notice Day, Last Trading Day and the relevant delivery dates rather than treating any one of them as a universal expiration threshold.

Front Month is the futures contract month nearest to maturity among the contract months currently trading for a given product. The CFTC also describes it as the spot or nearby delivery month. It identifies a contract’s position in the maturity sequence; it does not necessarily identify the contract with the most trading volume or open interest, and it is distinct from the cash-market spot price.

Nearest maturity is not always the active contract

As expiration approaches, market participants often move exposure into a later contract before the nearest contract stops trading. Liquidity can therefore migrate to the second-nearest maturity while the front month still exists. Terms such as lead month or active contract may be used for that more liquid reference contract, but usage is not perfectly uniform across venues and data products. The important distinction is between maturity order and market activity.

Front-month series are conventions, not positions

Historical front-month data is constructed by switching from one expiring contract to the next. A price series created by linking those contracts is useful for tracking the near end of the futures market, but it is not automatically the same as the return from holding and repeatedly rolling a futures position. The result depends on when the contract is switched and on the prices of the outgoing and incoming maturities at the roll. Data providers may also use different roll rules, so two series labelled “front month” can differ around rollover periods even when both are internally consistent.

This distinction becomes especially important near expiry and, for physically delivered futures, around notice and delivery procedures, when participants may move exposure forward well before the final trading or delivery stage. Researchers and traders should therefore document how a front-month series selects and changes contracts. Front month is fundamentally a nearest-maturity concept; liquidity leadership, execution choice and continuous-series construction are related but separate questions.

The Futures and Options Combined COT Report is a Commitments of Traders report format that combines futures positions with positions in options on futures after converting the option component to a delta-adjusted futures-equivalent basis. It is not a separate trader-classification family: the applicable COT report family still determines which trader categories appear. Legacy, Disaggregated and Traders in Financial Futures reports are available in both futures-only and futures-and-options-combined forms, while the Supplemental COT Report is a combined-format report for selected agricultural markets.

Why “combined” does not mean adding option contracts

Option positions cannot simply be added contract-for-contract to futures positions because an option generally does not carry the same directional exposure as one futures contract. In the combined methodology, option open interest and trader positions are converted to futures-equivalent amounts using delta factors. Long calls and short puts contribute long futures-equivalent exposure; short calls and long puts contribute short futures-equivalent exposure. Those amounts are then added to the corresponding futures positions to produce combined-long and combined-short figures.

The distinction affects more than the category positions. Combined open interest also incorporates the futures-equivalent option component, so percentages of open interest use a different exposure denominator from a futures-only report. In addition, an option's delta can change over time. The futures-equivalent contribution of an unchanged option holding can therefore move even when the number of option contracts held has not changed. A week-to-week movement in a combined COT series need not represent a one-for-one change in raw contract holdings.

Same classification framework, different exposure measure

The combined format preserves the classification framework of its underlying report family. A Disaggregated combined report uses Producer/Merchant/Processor/User, Swap Dealer, Managed Money and Other Reportables; a Traders in Financial Futures combined report uses Dealer/Intermediary, Asset Manager/Institutional, Leveraged Funds and Other Reportables; and a Legacy combined report retains the Commercial and Non-Commercial classifications. Including options does not create a new universal set of trader categories.

Like the wider COT system, the reports generally describe positions as of Tuesday's close and are published by the CFTC on Friday at 3:30 p.m. Eastern Time. Holidays can change that schedule. The distinction between the report date and the public-release date matters in point-in-time research because Tuesday's positioning was not public information on Tuesday.

The combined format is useful when option exposure is economically meaningful and a futures-only view would omit part of reported derivatives positioning. The two formats should not, however, be treated as interchangeable time series. Their difference reflects a measurement methodology as well as instrument coverage, and switching between them can create an apparent positioning change that comes from dataset construction rather than an equivalent change in trader contract holdings.

A futures contract is a standardized derivative agreement under which a buyer, or long, and a seller, or short, take opposite positions tied to a specified underlying, contract size and maturity, at a futures price established when the trade is entered. For a physically settled contract carried into the delivery process, the short must be prepared to make delivery under the contract’s rules, while the long must be prepared to take delivery and pay the required delivery value. For a cash-settled contract, no physical delivery occurs; an open position is instead settled financially by reference to the contract’s final settlement procedure. In either case, a position can usually be closed beforehand through an offsetting transaction.

In an organized centrally cleared futures market, the originally matched buyer and seller do not remain exposed to each other as a standalone bilateral contract. At the clearing level, the clearinghouse stands between clearing participants as buyer to each clearing seller and seller to each clearing buyer. Together with standardized contract terms, this structure makes contracts for the same product and maturity fungible rather than dependent on the identity of the original trading counterparty.

The obligation is larger than the cash posted

Entering a futures position does not normally require paying the contract’s full notional value. Instead, futures positions are subject to applicable margin requirements. Margin is collateral supporting performance, not a down payment on the underlying asset and not a measure of the maximum possible loss. The economic exposure comes from the contract specification: contract size, quoted price, tick size, contract month and settlement method. Delivery obligations therefore depend on the particular contract and on whether the position remains open into the relevant delivery or final-settlement process.

Daily settlement changes the cash-flow path

A crucial feature of exchange-cleared futures is mark-to-market settlement. Open positions are revalued using settlement prices, and gains or losses are transferred through the clearing system. A futures position can therefore consume or release cash well before expiration. Two price paths that ultimately reach the same final settlement value can create very different interim funding demands. That consequence is easy to miss when a futures contract is described only as an agreement to transact later at a price fixed today.

Futures are used to transfer price risk and to take market exposure, but the contract itself does not reveal why a participant holds it. Nor should a futures price automatically be treated as a forecast of the future spot price: it is the current market-clearing price for a standardized exposure with a particular maturity and settlement structure. For research or trading, the exact contract specification matters. “One contract” can represent very different notional exposure, cash-flow behavior, expiry risk and delivery obligations across markets.

A futures price is the current market price of a specific standardized futures contract, identified by its underlying and contract month or expiration. It is quoted according to that contract’s exchange convention and represents the price at which futures exposure is traded. A market can therefore have several futures prices at the same time—one for each listed maturity. The quoted futures price is not the full cash amount paid when a position is opened: the price and contract specifications determine the economic or notional exposure, while margin is collateral required to support that exposure.

Why futures and spot prices can differ

A futures price reflects the economics of carrying exposure to the contract’s settlement or delivery horizon. The relevant inputs vary by market. Equity-index futures, for example, are affected by financing and expected dividends; currency futures by interest-rate differentials; physical commodity futures can also reflect storage, insurance, financing, inventory conditions and convenience yield. Actual futures prices can also move away from a theoretical fair-value relationship as market supply and demand change.

That is why a futures price should not automatically be read as a pure forecast of the future spot price. Expectations can influence trading, but the observed price also reflects contract-specific carry and market structure. A premium to spot is not inherently bullish, and a discount is not inherently bearish. As expiration approaches, the difference between futures and the relevant cash, delivery or settlement value generally narrows through convergence or the contract’s final-settlement mechanism.

Trading quotations and settlement are different price fields

Market data for a futures contract can contain several distinct price fields, including the last transaction price, bid, ask and daily settlement price. The daily settlement price is an exchange-determined reference used to mark open positions to market and calculate daily gains and losses. It need not equal the final transaction of the session: an exchange may derive settlement from trading during a defined window or another published methodology. At expiration, the final settlement price can follow a separate contract-specific procedure.

For research, a futures price is therefore incomplete unless the contract month and price field are clear. Comparing prices across dates without controlling for maturity can mix economically different contracts, while substituting settlement prices for transaction prices can change measured returns, spreads and signals even when both datasets are correctly labelled.

Futures term structure is the pattern of prices for contracts on the same underlying market across different maturities at a single point in time. Plotted by contract month or expiration, those prices form the futures curve. It is a cross-sectional picture of how the market prices different horizons, not a direct forecast of the spot-price path that will actually occur.

A curve is more than contango or backwardation

When deferred contracts are progressively above nearer contracts, the curve or a segment of it is commonly described as contango; when nearer contracts are above deferred contracts, it is commonly described as backwardation. Those labels describe slope, not the full architecture of the term structure. A curve can be flat, humped, kinked, strongly seasonal, or backwardated nearby and in contango farther out. A calendar spread isolates the price relationship between two particular maturities; the term structure shows the entire strip of such relationships. Curve Slope is therefore a feature of Futures Term Structure, not a synonym for it.

The economics behind the shape depend on the market. In storable commodities, financing, storage and other carrying costs interact with inventories, physical availability and convenience yield. Seasonal production or consumption can create recurring maturity patterns, while disruptions may reprice nearby contracts more sharply than distant ones. Outside physical commodities, the relevant drivers are asset-specific. Short-rate futures, for example, can reflect expectations about future reference rates together with risk premia, so their term structure should not be read as a pure expectations path.

The plotted points may not all be formed the same way

Curve analysis is also a data-construction problem. In some markets, deferred official settlements can be implied from calendar-spread trades or quotes rather than from outright trades in every contract month. A curve built from a consistent set of official settlements can therefore differ from one assembled from the latest available trade in each maturity, especially where outright trading is sparse. An apparent kink may reflect genuine economics, settlement methodology, stale or asynchronous prices, or some combination.

Futures term structure is useful for relative-value and calendar-spread analysis, hedging economics, roll conditions and, in physical commodities, evidence consistent with changing inventory tightness or carrying incentives. Its shape can contain forward-looking information, but no single slope uniquely identifies its cause or future price direction. The practical task is to separate the observed cross-maturity prices from the economic story—and from the data-construction choices—used to interpret them.