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Last Trading Day

What is 'Last Trading Day'

The final day that a futures contract may trade or be closed out before delivery of the underlying asset or cash settlement must occur. By the end of the last trading day, the contract holder must be prepared to accept delivery of the commodity, or settle in cash if the position is not closed.

Explaining 'Last Trading Day'

The holder of a futures contract is obligated to fulfill the terms of the contract, however, in most cases, delivery of the asset underlying the futures contract does not occur, as most investors use futures as a method to hedge or speculate on the underlying asset's price.


Further Reading


Calendar effects in Eastern European financial markets: evidence from the Czech Republic, Slovakia and Slovenia
www.tandfonline.com [PDF]
… Advanced search. Journal Applied Financial Economics. Volume 14, 2004 - Issue 14 … Moreover they observe that the returns are higher especially during a four day period starting from the last trading day of the old month until the first three business days of the new month …

Investor sentiment, trading behavior and stock returnsInvestor sentiment, trading behavior and stock returns
www.tandfonline.com [PDF]
… Advanced search. Journal Applied Financial Economics. Volume 14, 2004 - Issue 14 … Moreover they observe that the returns are higher especially during a four day period starting from the last trading day of the old month until the first three business days of the new month …

Program trading and expiration-day effectsProgram trading and expiration-day effects
www.tandfonline.com [PDF]
… Advanced search. Journal Applied Financial Economics. Volume 14, 2004 - Issue 14 … Moreover they observe that the returns are higher especially during a four day period starting from the last trading day of the old month until the first three business days of the new month …

Trading patterns, bid-ask spreads, and estimated security returns: The case of common stocks at calendar turning pointsTrading patterns, bid-ask spreads, and estimated security returns: The case of common stocks at calendar turning points
www.sciencedirect.com [PDF]
… Advanced search. Journal Applied Financial Economics. Volume 14, 2004 - Issue 14 … Moreover they observe that the returns are higher especially during a four day period starting from the last trading day of the old month until the first three business days of the new month …

The dependence between hourly prices and trading volumeThe dependence between hourly prices and trading volume
www.jstor.org [PDF]
… Advanced search. Journal Applied Financial Economics. Volume 14, 2004 - Issue 14 … Moreover they observe that the returns are higher especially during a four day period starting from the last trading day of the old month until the first three business days of the new month …

Event studies in economics and financeEvent studies in economics and finance
www.jstor.org [PDF]
… Advanced search. Journal Applied Financial Economics. Volume 14, 2004 - Issue 14 … Moreover they observe that the returns are higher especially during a four day period starting from the last trading day of the old month until the first three business days of the new month …

Financial innovation: The last twenty years and the nextFinancial innovation: The last twenty years and the next
www.jstor.org [PDF]
… Advanced search. Journal Applied Financial Economics. Volume 14, 2004 - Issue 14 … Moreover they observe that the returns are higher especially during a four day period starting from the last trading day of the old month until the first three business days of the new month …

A day-end transaction price anomalyA day-end transaction price anomaly
www.jstor.org [PDF]
… Advanced search. Journal Applied Financial Economics. Volume 14, 2004 - Issue 14 … Moreover they observe that the returns are higher especially during a four day period starting from the last trading day of the old month until the first three business days of the new month …

ADMIRAL: A data mining based financial trading systemADMIRAL: A data mining based financial trading system
ieeexplore.ieee.org [PDF]
… Advanced search. Journal Applied Financial Economics. Volume 14, 2004 - Issue 14 … Moreover they observe that the returns are higher especially during a four day period starting from the last trading day of the old month until the first three business days of the new month …



Q&A About Last Trading Day


How do you know if someone is a day trader or not?

They will have multiple positions at any given time during the same session.

Why would anyone want to be a day trader instead of long-term investor?

Because it can be more profitable than long-term investing, but also riskier due to higher leverage used by most brokers for margin loans; in the United States, Regulation T permits an individual to borrow up to 50% of their account value from their broker for margin loans on stocks only (not options). The use of leverage magnifies both gains and losses, so that substantial losses or gains can occur in a very short period without any change in market prices. This effect becomes even greater with high volatility stocks since these stocks experience even larger price swings than low volatility stocks over short periods of time. Therefore, they may be considered more risky than low volatility stocks despite having lower average returns over longer periods because they are riskier investments overall when compared on an equal basis (i.e., taking into account both average return and risk). In addition, some brokerage firms offer cash incentives for executing trades that meet certain criteria; this practice has been criticized as encouraging excessive levels of risk-taking behavior among its clients who may not fully understand the risks involved with such practices (see also conflict-of-interest). The

What happens if you fail to deliver on your contract?

If you fail to deliver on your contract, you will have violated exchange rules and could face penalties from your broker-dealer and/or exchanges.

When does delivery take place in most cases?

Delivery takes place in most cases at the end of the last trading day, which is also known as settlement date.

What does "day" mean in day trading?

A day trader closes all positions within one trading session.

Who are the typical day traders?

Day traders are typically speculators.

Why do investors use futures as a method to hedge or speculate on an underlying asset's price?

Investors use futures as a method to hedge or speculate on an underlying asset's price because they are not obligated to fulfill terms of their contracts.

What is the final day that a futures contract may trade or be closed out before delivery of the underlying asset must occur?

The final day that a futures contract may trade or be closed out before delivery of the underlying asset must occur is called the last trading day.

How does this affect investors?

This affects investors by allowing them to avoid taking possession of physical commodities.

What is day trading?

Day trading is a form of speculation in securities.

What is the purpose of day trading?

To avoid unmanageable risks and negative price gaps between one session's close and the next session's open.