First Notice Day in futures trading is the first date on which the seller of a physically delivered futures contract can issue a notice of intent to deliver the underlying commodity, and the clearinghouse can assign that notice to a long position holder. If you’re still holding a long contract on or after that date, you can be obligated to accept delivery and pay the full invoiced value of the goods in same-day funds. For a standard corn contract that’s around $23,500; for crude oil, close to $99,000.1CME Group. Crude Oil Futures Contract Specs Most traders who don’t want a truckload of grain simply close or roll their position before this date arrives.
Which Contracts Actually Have a First Notice Day
First Notice Day only exists for physically delivered futures. Cash-settled contracts skip the delivery process entirely. The E-mini S&P 500, Nasdaq-100 futures, and most interest rate futures settle in cash: at expiration the exchange calculates the difference between your entry price and the final settlement price, adjusts your account, and the contract disappears. No delivery notice, no warehouse receipt, nothing physical to receive.
Physically delivered contracts, mainly agricultural products, energy, and metals, work differently. Once the delivery window opens, the short side can file a Notice of Intent to Deliver, and a long holder gets matched to receive the goods. Whether a given contract settles physically or in cash is listed in its specification document on the exchange’s site. Confusing the two is one of the more common ways traders end up unexpectedly on the wrong side of a delivery assignment.
How the Clearinghouse Picks Who Gets Assigned
The clearinghouse sits between every buyer and seller and guarantees performance on both sides. When a short position holder decides to deliver, they file a Notice of Intent to Deliver specifying the commodity, quantity, and delivery location. The clearinghouse then matches that notice to a long holder.
At CME Group, notices go to the oldest open long positions first. CME Rule 713.D directs the clearinghouse to pass delivery notices “to the clearing members obligated by the oldest open long contracts.”2CME Group. CME Rulebook Chapter 7 – Delivery Facilities and Procedures If you’ve held your long since the start of the delivery month while others got in more recently, you’re at the front of the line. Once the match is made, both sides are locked in: the seller must deliver conforming goods, and the buyer must pay.
When First Notice Day Falls
There is no single First Notice Day that applies across all futures. Each exchange sets the date based on the logistics of the underlying commodity, and it’s published in the contract specifications months in advance. For many agricultural contracts at CME Group, First Notice Day is the last business day of the month before the delivery month. Energy and metals contracts follow their own timelines. Gold, live cattle, and Treasury bond futures each have distinct schedules even though they trade on the same exchange.
Exchanges operate under federal oversight through the Commodity Exchange Act, which requires designated contract markets to establish and enforce the terms of every listed contract, including delivery procedures and timelines.3Office of the Law Revision Counsel. 7 USC 7 – Designation of Boards of Trade as Contract Markets The CFTC supervises the exchanges but generally lets each market write its own delivery rules, provided the contract design resists manipulation.
For any contract you trade, check the specification page for three dates: First Notice Day, Last Notice Day, and Last Trading Day. Between First Notice Day and Last Trading Day, delivery notices can be issued on any business day, and if you’re still long, you can be assigned at any point in that window.
What Happens If You’re Still Long on First Notice Day
Receiving a delivery notice turns your futures position into a purchase obligation. The margin deposit that secured your trade no longer covers you. You owe the full invoiced value of the commodity in same-day funds.2CME Group. CME Rulebook Chapter 7 – Delivery Facilities and Procedures Standard corn (5,000 bushels near $4.70 per bushel) runs about $23,500. Crude oil (1,000 barrels near $99) runs close to $99,000. Gold, copper, and lumber contracts climb higher. The jump from a few thousand dollars of margin to a five- or six-figure invoice is where unprepared traders get hurt.
Once payment clears, you receive the documents that prove ownership: a warehouse receipt or shipping certificate issued by an exchange-approved facility.4CME Group. Warehouse Receipts vs Shipping Certificates FAQ These instruments are transferable, so you can sell or re-deliver them to another party rather than physically hauling anything away. Most delivery instruments change hands several times before anyone actually loads a truck.
You also start paying storage. Charges begin the day after delivery and continue until you sell the instrument, cancel it for physical load-out, or re-deliver it. CME Group uses a Variable Storage Rate system for grain contracts that adjusts maximum rates with market conditions.5CME Group. Variable Storage Rate Load-out fees for physically removing the commodity are set by the individual facility, and the buyer pays them.
Not paying is not an option. CME Rule 715 directs the clearinghouse to debit the clearing member’s account by whatever amount is needed to complete the delivery. Failure to accept delivery or pay in full is classified as “an act detrimental to the interest or welfare of the Exchange,” which triggers formal disciplinary proceedings.2CME Group. CME Rulebook Chapter 7 – Delivery Facilities and Procedures In practice, your broker liquidates whatever assets are needed to cover the shortfall, and the exchange may add fines or suspend your trading privileges.
How to Avoid Delivery: Close or Roll
The simplest way out is to close the position before First Notice Day. You sell the same number of contracts you’re long, the obligation nets to zero, and you pay only commission and the spread on the exit. This happens thousands of times per contract cycle and is entirely routine.
Rolling keeps your market exposure but moves it to a later contract month. You sell the expiring month and buy the next month out, ideally in a single calendar spread order so both legs execute together. The cost of a roll depends on the price difference between the two months, your commission, and execution quality. In contango, rolling costs money over time. In backwardation, you may pick up a small credit.
Your Broker’s Cutoff Is Earlier Than the Exchange’s
Most retail brokers won’t wait for First Notice Day. They set their own earlier deadlines and liquidate positions that miss them, without asking. Interactive Brokers publishes a close-out schedule that varies by product, with some contracts having a deadline one business day before the exchange cutoff and others five or even seventeen business days earlier.6Interactive Brokers LLC. Futures Close Out Aluminum contracts at COMEX carry a 17-business-day close-out window. For less common commodities, the broker’s deadline may arrive weeks before the exchange’s.
A forced liquidation happens at whatever price is available, often in a thinly traded expiring contract. Your broker isn’t shopping for a good fill; they’re eliminating their own delivery risk. Pull your broker’s close-out calendar for each product you trade and put the dates on your own calendar.
Taxes for Traders Who Close, Roll, or Take Delivery
Regulated futures contracts get special treatment under Section 1256 of the Internal Revenue Code. Regardless of holding period, gains and losses are split 60% long-term and 40% short-term.7Office of the Law Revision Counsel. 26 US Code 1256 – Section 1256 Contracts Marked to Market Because long-term rates are lower, the blended treatment usually beats what a stock trader pays on the same holding period. It applies whether you close, roll, or let the contract expire.
The wash sale rule that trips up stock traders does not apply to commodity futures. Section 1091 limits wash sales to “stock or securities,” and standard commodity futures are not covered.8Office of the Law Revision Counsel. 26 US Code 1091 – Loss From Wash Sales of Stock or Securities You can close a losing corn position and immediately reopen it in the next month without losing the deduction. For traders who roll around First Notice Day, that’s a real edge over equity markets.
Taking physical delivery changes the picture. The delivered commodity becomes a capital asset with a cost basis equal to what you paid, and any later gain or loss on the physical goods follows standard capital gains rules based on your actual holding period, not the Section 1256 blended rate. An accidental delivery isn’t only a logistics problem; it also shifts your tax treatment in ways that aren’t obvious until you file.