Futures contracts do not have time decay in the way options do. There is no premium to erode because a futures contract is a binding obligation to buy or sell at settlement, not a right that expires unused. Time still affects a futures position, though, through the cost of carrying the underlying, the convergence of the futures price to the spot price near expiration, and the recurring expense of rolling contracts forward. Whether those effects help you or hurt you depends on the shape of the forward curve when you enter the trade.
Why Options Decay and Futures Don’t
An option is a right you paid for. The premium reflects the possibility that the underlying moves in your favor before expiration, and every day that passes without that move eats into the premium. Theta quantifies the erosion: an at-the-money call with 60 days left might lose around $0.06 per day, and the rate accelerates as expiration approaches. If the underlying price sits still, the option eventually reaches zero and your entire investment is gone.
A futures contract works differently. Both sides are obligated to settle at expiration, either by physical delivery or cash settlement.1CME Group. Cash Settlement vs. Physical Delivery You did not pay a premium for a possibility; you entered an agreement. If the underlying is worth $50 at expiration, the contract settles at $50, and your gain or loss depends only on where you entered. Holding time, on its own, does not shrink the contract’s value.
The distinction matters most in flat markets. An options trader who is right about direction but wrong about timing can lose everything. A futures trader in the same scenario breaks even on the price move and only pays the carrying cost differential, which is typically a fraction of a percent per month rather than a steep daily bleed. The trade-off is that futures expose you to the full downside without the capped loss that a purchased option provides.
How Time Actually Enters the Futures Price
The connection between futures prices and time runs through the cost-of-carry model. If you could buy a commodity today and store it until a future delivery date, you would incur real expenses along the way, and those expenses get baked into the futures price. The relationship is: futures price equals spot price plus storage costs, plus the interest cost of tying up capital, minus any convenience yield from holding the physical commodity now.
Storage costs are concrete. For wheat futures on the Chicago Board of Trade, the exchange sets maximum storage charges through a Variable Storage Rate mechanism. As of March 2026, the maximum rate for Chicago SRW wheat is about 5 cents per bushel per month, while Hard Red Spring wheat runs about 11 cents per bushel per month.2CME Group. Variable Storage Rates (VSR) A contract expiring in six months carries roughly six months of storage; a contract expiring in two weeks carries almost none.
The interest component works the same way. Buying a physical commodity today ties up capital that could earn a return elsewhere. The Secured Overnight Financing Rate, which has replaced LIBOR as the benchmark for U.S. dollar lending, typically serves as the reference rate.3Board of Governors of the Federal Reserve System. Inferring Term Rates from SOFR Futures Prices As the days to delivery shrink, so does the financing charge embedded in the price. This is the closest thing futures have to time-based erosion: a predictable reduction in carrying costs as expiration nears. Unlike theta, though, it reflects real economic costs disappearing, not a speculative premium evaporating.
Basis Convergence Near Expiration
Basis is the gap between the spot price in the cash market and the futures price. Before expiration, that gap can be positive or negative depending on supply, storage, and expectations. As the delivery date arrives, the gap closes. The mechanism is arbitrage: if the futures price at expiration were meaningfully higher than the spot price, a trader could buy the physical commodity and sell the futures, locking in a risk-free profit. That pressure pushes the two prices together. On the final settlement day, the futures price equals either the cash market price for physically delivered contracts or a benchmark settlement value for cash-settled contracts.1CME Group. Cash Settlement vs. Physical Delivery
Contango, Backwardation, and Whether Time Helps or Hurts
The direction of the basis decides whether time works for or against a long position. In contango, futures prices sit above the spot price, which is the normal state for many commodities because it reflects the cost of holding inventory. In backwardation, futures prices sit below the spot price, usually because immediate demand for the physical commodity is high enough to flip the relationship.
If you are long futures in a contango market, convergence works against you. Your contract was priced above spot, and as expiration approaches, that premium fades. Even if the underlying spot price holds perfectly steady, your contract drifts down toward it. This feels a lot like time decay, and in practical terms the effect on your account is similar, though the mechanics are different.
The reverse applies in backwardation. A long position benefits as the below-spot futures price rises to meet the cash market. Time becomes a tailwind. Whether you experience drag or boost depends entirely on the shape of the curve when you enter.
Roll Costs Compound the Effect
Most futures traders never intend to take delivery. They close the expiring contract and open a new one in a later month, a process called rolling. For most major contracts, the bulk of open interest rolls during the last ten business days before the contract month begins.4CME Group. Pace of the Roll User Guidep>
In a contango market, every roll means selling the cheaper near-month contract and buying the more expensive far-month contract. If crude oil trades at $70 for the front month and $71 for the next, you lose $1 per contract on the roll. Month after month, the cumulative drag can be substantial even when spot prices trend sideways. Commodity ETFs that maintain continuous long exposure are especially exposed to this because they roll mechanically on a schedule.
In backwardation the math reverses. You sell the higher-priced near-month and buy the cheaper far-month, pocketing the difference. This positive roll yield was a significant return driver for commodity index strategies during periods of persistent backwardation in energy markets.
Exchange fees add a small but guaranteed layer of cost on top of the roll. As of March 2026, the CBOT charges electronic trading fees of $0.56 per contract for soybean futures, $0.31 for E-mini Dow futures, and $0.14 for 10-year Treasury futures.5CME Group. CBOT Fee Schedule Rolling doubles the fee count for each cycle, and broker commissions sit on top. In contango, these charges compound the drag; in backwardation, they slightly offset the benefit.
A note on ignoring the roll entirely: if you hold past First Notice Day on a physically delivered contract, you can end up in the delivery process. For NYMEX metals contracts, First Notice Day falls on the last business day of the month before the delivery month.6CME Group. Chapter 7 Delivery Facilities and Procedures Retail traders who miss that date can find themselves obligated to accept the physical commodity, which makes the administrative cost of rolling look trivial.
Margin and the Cost of Staying in the Trade
Holding a futures position does not require paying the full contract value, but it does require posting margin, which the exchanges call a performance bond. Initial margin for major contracts typically runs in the single-digit percentages of notional value. A CME advisory from January 2026 showed gold futures at 6 percent initial margin, with maintenance margin at the same level or slightly below. Energy and agricultural contracts can run higher depending on volatility.
If the market moves against you and your account equity drops below the maintenance level, your broker issues a margin call. Federal regulations require security futures intermediaries to take steps to liquidate undermargined positions “promptly and in an orderly manner” when there is a deficit.7eCFR. 17 CFR 242.406 – Undermargined Accounts Most brokers give you until the next business day to deposit funds, but they are not required to wait. In fast markets, liquidation can happen without advance notice.
This is where time enters the picture in a different way. An option buyer’s maximum loss is the premium paid. A futures trader’s losses are theoretically unlimited, and the longer you hold a position, the more opportunities the market has to move against you temporarily. Time does not erode the contract’s value, but it does raise the odds you will need to weather a margin call along the way. A longer holding period requires a larger capital buffer even if the long-term thesis is right.