Fixed-term futures contracts: expiry, rollover, and settlement

A perpetual futures position never expires. Whereas, a fixed-term contract does: on a specific date, at a specific price, and with no exceptions. If you hold one past that date without acting, the contract settles and your position closes automatically. However, that is not a problem if you know it is coming.

A fixed-term futures contract is a standardized agreement to buy or sell an asset at a set price on a predetermined expiry date. Sometimes called "quarterly futures" because the most common expiry schedule runs on March, June, September, and December cycles, these contracts differ from perpetual futures in one fundamental way: they have an end date.

Subsequently, there is no funding rate and no mechanism to hold the position indefinitely. As expiry approaches, the futures price converges naturally to the spot price through arbitrage, rather than through the periodic payments that keep perp prices anchored. On Kraken, those payments settle every 8 hours for US perpetuals and every hour for EU and ROW perpetuals.

For a direct comparison of how the two structures differ, see how perps differ from traditional futures.

At expiry, the contract closes automatically at the settlement price. Traders who hold to expiry have their position settled according to the contract's settlement method, most commonly cash settlement, where the difference between the entry price and the settlement price is credited or debited to the account.

However, you do not have to hold to expiry. Most traders close or roll their position in the days or weeks before the expiry date. Holding to settlement is perfectly valid for strategies where you want a precise exit at the settlement price, but for traders who want to maintain continuous exposure, rolling is the standard approach.

Settlement prices are typically calculated from an index or reference rate at a specific point on the expiry date, not from the last traded price. The exact settlement methodology varies by contract.

Rolling a futures position means closing your position in the expiring contract and opening a new position in the next contract cycle before the expiry date. Traders do this to maintain continuous exposure to the underlying asset without going through settlement.

For example, a trader holding a December S&P 500 futures contract who wants to stay long through the new year would close the December position in the week or two before expiry, then open a March contract at the prevailing price. The trade is two orders (one close, one open), but the practical effect is that the position continues.

Most professional traders roll in the days before expiry when liquidity in the new contract is highest, typically in what the market calls the roll window. Be aware that rolling too late carries the risk of poor execution on the expiring contract as liquidity thins out ahead of settlement.

When you roll from an expiring contract to a new one, the price difference between the two is the roll cost.

If the new contract trades above the expiring one, the market is in contango and rolling costs money. You close a cheaper contract and open a more expensive one. If the new contract trades below the expiring one, the market is in backwardation and the roll generates a small credit. These price differences reflect the market's expectations about carrying costs, interest rates, and supply and demand in the underlying asset over the period to the next expiry.

For equity index and crypto futures, markets are typically in modest contango under normal conditions. For commodity futures like crude oil, the term structure can shift between contango and backwardation depending on supply conditions. These are illustrative patterns, not guarantees. Actual roll costs vary and should be checked at the time of rolling. For a full treatment of spot-futures spread mechanics, see basis trading.

Contango: A market situation where a commodity's futures price is higher than the current spot price, creating an upward-sloping forward curve. It commonly occurs when the "cost of carry" i.e. storage, insurance, and financing, makes future delivery more expensive than immediate purchase.

Backwardation: A market condition in futures trading where an asset's current spot price is higher than the prices in the futures market. It typically indicates high demand or severe supply shortages, creating a downward-sloping futures curve, as buyers pay a premium for immediate supply.

Cash settlement means the contract closes at the settlement price and the difference between your entry price and the settlement price is credited or debited to your account in cash. No physical asset changes hands. For most crypto and index contracts on Kraken, settlement is expected to be cash.

Physical settlement means the underlying asset is actually delivered at expiry. Standard crude oil futures (CL) on CME, for instance, call for physical delivery of 1,000 barrels in Cushing, Oklahoma, unless the position is closed before the last trading day.

The table below highlights the key differences between fixed-term futures contracts and perps.

For a deeper comparison of the two structures, see how perps differ from traditional futures.

Fixed-term futures let you take defined-duration exposure to crypto and TradFi assets with a known settlement date.

The educational material on this page is for information only and does not constitute an offer to trade futures. Kraken Futures is provided by a different licensed Kraken entity depending on where you live. Derivatives are complex instruments that carry a high risk of rapid losses due to leverage. You should not risk money you cannot afford to lose. Tax treatment depends on your individual circumstances and may change. Geographic restrictions may apply and can change without notice. Kraken products and services may not be covered by investor-compensation or deposit-protection schemes. Nothing on this page is investment, legal or tax advice. Access is subject to eligibility, local regulation and the Terms of Service for the legal entity you face.