Admittedly, when it comes to futures trading, there's a lot to keep track of since each contract has unique characteristics. However, if there is one thing you want to keep your head on a swivel for, it is understanding the difference between physically delivered/deliverable futures contracts subject to a First Notice Date or that settle based on the Last Trade Date.
tastyworks does not allow physical delivery of any futures contracts. Understanding the impacts of First Notice and Last Trade Dates can potentially help you when it comes to managing a futures position that settles physically.
- First Notice and Last Trade Dates for Outright Futures
- Physical Delivery vs. Financially Settled
- First Notice vs. Last Trade Date for Deliverable Futures Contracts
First Notice and Last Trade Dates for Outright Futures
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Physical Delivery vs. Financially Settled
Difference between taking delivery of the underlying or settling with cash
Before we get into what First Notice is, you'll need to understand the difference between physical delivery and financially settled futures contracts, as this plays a crucial role in why First Notice exists. Some futures contracts are financially settled (with cash), and some are physically-settled (or deliverable). You guessed it, when it comes to physically-settled futures contracts, that means you may potentially be on the hook to take delivery of 5,000 bushels of corn if you are long a corn future (/ZC) come first notice. However, at tastyworks, our risk team has some precautionary measures set to prevent physical delivery. Please continue to the next section below to learn more.
Futures contracts subject to physical delivery (deliverable)
The following futures asset classes are physically delivered:
- Energy (not E-mini)
- Interest Rates (T-Notes & Bonds)
Financially settled futures
The following futures are financially settled with cash and can be held to the termination of trading. When a financially settled future is held to the termination of trading, the cash-settled amount will appear in your account overnight following termination.
- E-mini Energy
- Equity Indices
First Notice vs. Last Trade Date for Deliverable Futures Contracts
Any physically-settled outright future(s) position not managed by the first notice date or the last trade date may be closed by our risk team, regardless of profit or loss. Furthermore, tastyworks will not automatically roll a future(s) contracts to avoid the first notice date. If you wish to maintain a physically-settled futures contract position, you must roll the contract to a different expiration cycle.
What is First Notice?
In a nutshell, the first notice date is the first day, a long or short holder of a deliverable futures contract can potentially be forced to make a delivery or take delivery of the underlying asset. At tastyworks, to prevent physical delivery, our margin desk will send out a First Notice Date email to any customer holding a long or short physically-settled futures contract a few days before an upcoming First Notice date. The First Notice Date email will inform you when you need to roll or close your position to avoid potential liquidation by our risk team.
Futures contracts subject to First Notice
The following futures contracts are subject to a First Notice Date. The contracts listed below must be closed or rolled into the next cycle before the First Notice Date.
- Interest Rates
What is the Last Trade Date for futures?
Unlike futures contracts subject to a First Notice Date, other deliverable futures contracts will settle based on the Last Trade Date instead. Rather than being forced to take delivery of the underlying asset before the termination of trading, you will be forced to take physical delivery based on the settlement of the Last Trade Date. At tastyworks, to prevent physical delivery, our margin desk will send an email to any customer holding a long or short physically-settled futures contract a few days before the last trade date.
Futures contracts subject to Last Trade Dates
The following futures contracts are subject to delivery based on the Last Trade Date. The rolling period for Currency and Energy (not E-minis) are two days and five days, respectively. Currency futures and Energy (not E-minis) futures must be rolled into the next cycle or closed one day before the Last Trade Date.
- Energy (not E-minis)