⏳ The Ticking Time Bomb
- Every futures contract has an expiry date — a hard deadline
- In the last week, liquidity evaporates as traders exit or roll
- Physical delivery risk creates panic selling and buying
- The April 2020 oil crash to -$37 happened on expiry day
- Understanding this cycle is mandatory for commodity survival
What Actually Happens at Expiry?
Unlike stocks, futures contracts don't live forever. They have birth dates and death dates.
Every futures contract specifies:
- The underlying: What you're trading (crude oil, gold, natural gas, etc.)
- The contract month: When it expires (May 2026, June 2026, etc.)
- The expiry date: The last day you can trade this contract
- Settlement type: Cash-settled or physical delivery
On expiry day, one of two things happens:
Physical Delivery
If you hold till expiry, you take delivery of the actual commodity. Yes, 1000 barrels of oil. In a warehouse. With your name on it.
Cash Settlement
Your position is settled in cash at the final settlement price. No physical commodity changes hands.
"Most retail traders have no idea that holding a crude oil contract to expiry means someone will try to deliver 1000 barrels of oil to them. That's not a metaphor. That's 42,000 gallons showing up somewhere."
— Commodity Broker, 25 years experience
The Anatomy of Expiry Week Chaos
Let's walk through what happens in the final week before a major commodity contract expires:
T-10 Days: Early Warnings
Smart money starts rolling to the next month. Open interest in the expiring contract starts declining. Bid-ask spreads widen slightly.
T-5 Days: The Migration Begins
Brokers send expiry warnings. Margin requirements increase. Liquidity noticeably drops. The "front month" premium or discount to next month becomes volatile.
T-3 Days: Danger Zone
Open interest plummets. Only committed traders remain. Price can diverge from fundamentals as technical flows dominate. Gaps become common.
T-1 Day: Last Chance Saloon
Final day for most retail positions. Brokers force-close positions. Desperate exits create wild swings. Bid-ask spreads explode.
Expiry Day: Armageddon
Only players with physical delivery capabilities remain. Price can completely disconnect from reality. This is where -$37 oil happened.
The Roll: Your Survival Mechanism
"The Roll" is what traders do to avoid expiry chaos: sell the expiring contract and buy the next month's contract.
Sounds simple. It's not.
In April 2020, oil was in super contango. The May contract was trading at $20, but June was at $30. Anyone who wanted to roll had to pay a 50% premium. Or take delivery of oil they couldn't store.
Most chose the third option: panic sell at any price.
The Liquidity Death Spiral
Here's the vicious cycle that makes expiry weeks so dangerous:
Step 1: Traders Exit
Experienced traders roll or close positions early to avoid expiry risk.
Step 2: Liquidity Drops
With fewer players, bid-ask spreads widen. Market depth shrinks.
Step 3: More Traders Exit
Wider spreads scare off remaining traders. Exodus accelerates.
Step 4: Trapped Positions
Whoever is left faces massive slippage or forced liquidation at terrible prices.
The last man standing in an expiring contract is the exit liquidity. Don't be the last man standing.
Expiry Calendar: Know Your Dates
Every commodity has its own expiry schedule. Here are the big ones:
For MCX India:
- Gold: 5th of contract month
- Silver: Last day of contract month
- Crude Oil: 19th-20th of contract month
- Natural Gas: Last day of contract month
Case Study: The April 2020 Oil Apocalypse
April 20, 2020. The day oil prices went negative. Let's dissect what happened:
The Perfect Storm
Context: COVID lockdowns killed global oil demand by 30%+
The Problem: May futures expiring on April 21. Physical delivery only.
Storage: Cushing, Oklahoma (delivery point) was 80%+ full
The Trapped: Retail traders, ETFs like USO, Bank of China's retail product
What Happened:
- No one wanted delivery — there was nowhere to store the oil
- Sellers became desperate, buyers disappeared
- With no bids, sellers accepted ANY price to close positions
- Price went from +$17 to -$37.63 in one day
Translation: Sellers were paying $37.63 per barrel for someone to take oil off their hands
This wasn't a black swan. It was predictable to anyone who understood expiry mechanics:
- Storage was full — everyone knew this
- May contract was about to expire — publicly known
- Physical delivery required — contract specifications were clear
- Retail and ETFs couldn't take delivery — obvious
"Anyone holding May crude on April 20th was playing Russian roulette with a fully loaded gun. The expiry mechanics made it inevitable. The only surprise was how negative it went."
— Energy Derivatives Strategist, Major Bank
The Hidden Expiry Games
Expiry week isn't just chaotic — it's where sophisticated players hunt retail traders.
The Squeeze Play
Big players accumulate positions, then push prices to trigger stop losses of trapped traders. Expiry week's low liquidity makes this easier.
The Roll Arbitrage
Funds that must roll (like ETFs) are predictable. Smart traders front-run them, buying the next month before ETFs roll, then selling into ETF buying.
The Settlement Hunt
Options on futures often settle on a different calculation than the underlying. Traders manipulate the settlement window for options profit.
The Delivery Bluff
Threaten to take delivery to squeeze shorts who can't deliver. Works in tight supply situations.
The Expiry Week Survival Guide
How to not become exit liquidity:
"In commodity futures, there are three types of traders: those who understand expiry, those who will learn the hard way, and those who already blew up. Don't be category two or three."
— Floor Trader, CME Group, 30 years
MCX-Specific Expiry Rules
For Indian traders, here's what you need to know about MCX expiry:
- Position Limits Tighten: As expiry approaches, exchanges reduce position limits. You may be forced to reduce size.
- Margin Spikes: MCX increases margin requirements in the last week. Your ₹1 lakh margin might suddenly need ₹2 lakh.
- Physical Delivery: Gold and silver have delivery options on MCX. Check your broker's policy — most don't support delivery.
- Settlement Price: MCX uses specific settlement mechanisms (volume-weighted average of last 30 minutes, etc.). Know the rules.
- Rollover Costs: MCX-listed commodities often have different rollover costs than COMEX. Calculate before you roll.
Pro Tip: The MCX Calendar
MCX publishes expiry calendars at the start of each year. Download it. Mark every expiry date in your trading calendar. Set alerts 10 days before each expiry for any contract you trade.
Link: mcxindia.com → Circulars → Trading Calendar
The Bottom Line
Expiry week isn't just about dates on a calendar. It's a fundamental restructuring of market dynamics.
The players change. The liquidity changes. The rules of the game change.
Expiry Week Survival Summary
- Expiry is a hard deadline — you can't negotiate with time
- Liquidity evaporates as smart money exits early
- Roll costs matter — contango can eat your profits
- Physical delivery is real — don't end up with 1000 barrels of oil
- The last man standing loses — exit early or pay the price
The traders who survive commodities long-term aren't the best at picking direction.
They're the best at understanding the plumbing — the mechanics that move prices when fundamentals take a back seat.
Expiry week is when the plumbing matters most. Respect it or get flushed.