Picking Futures Contract Months
- Is One Better Than Another?

Each futures commodity has several possible futures contract months...so which one offers the best profit potential for a trade?

It all depends....but generally, futures trading opportunities can and do present themselves in all futures contract months.

In this section, you'll get acquainted with the following:

- Trading months, what they are
- Trading month "codes"
- Futures contract front month
- FND (first notice day), LTD (last trading day), and
- Selecting which trading months to trade

Futures Contract Months Explained

Some commodities have delivery months every month throughout the year, whereas others may only have four or five delivery months that can be traded.

As an example, the futures trading months or delivery months for Wheat, Corn and Oats (part of the "Grains" or agricultural commodities) are March, May, July, September and December.

The only delivery months or you can trade in Pork Bellies are February, March, May, July and August.

Whereas the Energy commodities...Crude Oil, Heating Oil, Gasoline and Natural Gas...are delivered and traded year 'round, in every month, offering you year 'round energy commodities trading.

Symbols for Futures Contract Months

The commodity trading months and their corresponding symbols are listed below:

SYM. / MONTH
F = January
G = February
H = March
J = April
K = May
M = June
N = July
Q = August
U = September
V = October
X = November
Z = December

When you view a listing or chart of commodity futures and their related specifications...the various data about each commodity...it is presented across several columns.

Under the delivery months column, you will see alphabetical letters denoting the particular trading months a commodity is traded, and,
under the month column, the specific month it is delivered.

It will look something like this (in a single line):

CONTRACT........SYMBOL.....EXCHANGE......DELIVERY MONTHS....Etc. Soybeans..........QBS, S.......CBOT.............F,H,K,N,Q,U,X

Futures Contract Months
...First Notice Day (FND)

First Notice Day's are established by the various commodity Trading Exchanges.

This date the first day in a specific futures contract month, of a notice of intent to accept delivery of the actual commodity is made.

Why is this important?

Well, remember, we are only interested in speculating and profiting on futures contract price fluctuations...and not interested in taking physical delivery.

So, if you are long (anticipating rising prices) any trades, you want to liquidate or close (sell) those trade positions within one to two weeks BEFORE the end of this "FND" date of the contract month you are trading.

Futures Contract Months
...Futures Last Trading Day (LTD)

If you are short (anticipating falling prices) a trade position(s), you want to liquidate those positions one to two weeks prior to the futures last trading day.

If you miss either of these dates when long or short....which should never happen, as you should ALWAYS be fully aware of them and their importance...

...your broker should be able to help make arrangements to buy or sell your contract to another party willing to accept delivery.

SOOOO...Which Month Do You Trade?

If you're a futures day trader, you're not interested in looking past today. Your trades are always put on and closed the same day.
So that's a no-brainer.

If you're more inclined to position trading (remaining in a trade for several days to several weeks), or long-term trading (holding a position for months to years), then your decision takes on a different perspective.

Let's look at a position trading scenario, from a general angle.

In this example, you decide you want to trade a more gradually trending futures market that isn't as prone to rapid and sometimes violent price swings and moves.

Currencies and the FOREX can generally (but not always) tend to have more gradual moves.

Checking the historical charts for one of them, you note that good moves often take place over a 2-4 month period(in our pretend example here).

In this case, you would (probably) not want to trade the front month, as there's (most likely) not enough time left (just 2-3 weeks perhaps)in that futures contract for the potential price move to occur.

You would want to look at monthly futures contracts still offering 3 to 6 months left until their delivery date.

And then you'd do the appropriate trade analysis on each of the monthly price charts, choosing the delivery month that makes the most sense to you to trade, based on your analysis, historical price data, trade indicators/confirming indicators, fundamentals and/or technical analysis that you use.

Another perspective on which of a futures' several futures trading months to trade is that the front month or "closer in" trading months to the front month...depending on the specific commodity and/or other factors...will be more likely to have higher futures trading volume (more futures contracts traded) than further out futures contract months.

Why is higher trading volume important?

Because, these "closer in" trading months tend to be more "liquid", and easier to get into and out of trades (faster and better fills).

But...if your price move in that front or "closer in" month doesn't happen as you hoped it would, you'll have to exit that contract before its' monthly LTD...then re-enter the next or some subsequent month (assuming your analysis holds in the month you are considering).

This will allow you to continue with your hoped for price move in a further out futures contract month.

Keep in mind that you also incur trading commissions each time you enter/exit a trade.

So if you are more inclined to play front/early commodity futures trading months, you will likely end up paying more commissions in those cases where a move takes several weeks to months to play out.

Conversely, if you get into one of the further out futures contract months...and then choose to exit the trade earlier than anticipated, you may find it more difficult to do so, and at your desired exit price point.

This can be due to low trading volume or liquidity in that further out month...due to potentially fewer traders available and willing to take the offset (long or short) position.

Those are 2 angles of how you might consider choosing which futures trading months to trade.

And just as there are numerous futures traders in the markets, there are no doubt, other ways to look at approaching and evaluating how you make this decision.


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