First Notice Day

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DEFINITION of 'First Notice Day'

The day after which an investor who has purchased a futures contract may be required to take physical delivery of the contract's underlying commodity. First notice day varies by contract; it also depends on exchange rules. If the first business day of the delivery month was Monday, Oct. 1, first notice day would typically fall one to three business days prior, so it could be Wednesday, Sept. 26, Thursday, Sept.27, or Friday, Sept. 28. Most investors close out their positions before first notice day because they don't want to own physical commodities.

BREAKING DOWN 'First Notice Day'

The two other key dates in a futures contract are last notice day, the last day the seller can deliver commodities to the buyer, and last trading day, the day after which commodities must be delivered for any futures contracts that remain open. A common way of closing a futures position and avoiding physical delivery is to execute a roll forward to extend the contract's maturity. Brokerage firms that allow futures trading with margin accounts may require investors to substantially increase the funds in their margin accounts after first notice day, to ensure they can pay for a delivered commodity.

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RELATED FAQS
  1. How do futures contracts roll over?

    Traders roll over futures contracts to switch from the front month contract that is close to expiration to another contract ... Read Full Answer >>
  2. Why do companies enter into futures contracts?

    Different types of companies may enter into futures contracts for different purposes. The most common reason is to hedge ... Read Full Answer >>
  3. What does a futures contract cost?

    The value of a futures contract is derived from the cash value of the underlying asset. While a futures contract may have ... Read Full Answer >>
  4. What are the main risks associated with trading derivatives?

    The primary risks associated with trading derivatives are market, counterparty, liquidity and interconnection risks. Derivatives ... Read Full Answer >>
  5. How can an investor profit from a fall in the utilities sector?

    The utilities sector exhibits a high degree of stability compared to the broader market. This makes it best-suited for buy-and-hold ... Read Full Answer >>
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    Electricity can be traded in the financial marketplace like any other commodity. Electricity futures trading offers an alternative ... Read Full Answer >>

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