CFD expiry refers to the date on which a Contract for Difference (CFD) contract terminates. Unlike some derivatives with fixed expiration dates, many CFDs do not have a predetermined expiry and can be held indefinitely, though certain types of CFD contracts do expire on specific dates.
Types of CFD Expiry
CFDs come in two main categories based on expiration:
Non-Expiring CFDs
Most equity, index, and commodity CFDs are non-expiring, meaning they have no set expiration date. These positions remain open until the trader decides to close them manually. Traders holding non-expiring CFDs pay overnight financing charges (swap rates) for each day the position remains open.
Expiring CFDs
Some CFDs, particularly those based on futures contracts, have predetermined expiry dates. These include:
- Futures-based CFDs: Linked to underlying futures contracts and expire on the same date as the futures
- Options CFDs: Mirror the expiry dates of their underlying options contracts
- Forward CFDs: Set to expire on a specific future date agreed upon at contract inception
What Happens at Expiry
When a CFD reaches its expiry date, several outcomes are possible depending on the broker and contract type:
Automatic Closure: The position closes automatically at the prevailing market price, and profits or losses are settled in the trader’s account.
Rollover: Some brokers offer automatic rollover, where the expiring contract is closed and a new contract for the next period is opened. This typically incurs a rollover fee and may result in price adjustments due to differences between the expiring and new contract prices.
Cash Settlement: All CFDs are cash-settled instruments, meaning no physical delivery of the underlying asset occurs at expiry. Only the difference between opening and closing prices is exchanged.
Expiry Dates and Trading Strategy
Understanding CFD expiry is crucial for trading strategy:
Traders holding futures-based CFDs must monitor expiry dates to avoid unexpected position closures or rollover costs. The period approaching expiry often sees increased volatility as contracts transition.
For non-expiring CFDs, while there’s no forced expiry, the cumulative cost of overnight financing charges can impact profitability for long-term positions, effectively creating an economic incentive to close positions rather than hold indefinitely.
Checking Expiry Information
CFD traders should always verify expiry details before opening positions:
- Review contract specifications provided by the broker
- Check the trading platform for expiry dates displayed alongside contract names
- Understand the broker’s rollover policies and associated costs
- Monitor calendar notifications for upcoming expiries on held positions
Proper management of CFD expiry dates helps traders avoid unexpected costs, maintain intended market exposure, and execute their trading strategies effectively.
For broker context, compare ASIC-licensed providers in our best CFD brokers Australia guide.