How does the maturity date of a futures contract impact the futures price?

The maturity date of a futures contract, also known as the delivery date, is the date on which the underlying asset must be delivered or settled in cash. The impact of the maturity date on the futures price depends on the type of futures contract.

For commodity futures contracts, the price of the futures contract at maturity will reflect the current market price of the underlying commodity. As the delivery date approaches, the futures price will tend to converge with the spot price of the commodity.

For financial futures contracts, such as stock index futures or interest rate futures, the relationship between the futures price and the underlying asset is more complex. In general, the price of financial futures contracts will reflect the expected future value of the underlying asset, based on market expectations for future economic conditions and other factors.

As the maturity date of a futures contract approaches, the futures price may fluctuate based on changes in market expectations or other factors that affect the value of the underlying asset. At expiration, the futures price will converge with the spot price of the underlying asset or settle in cash based on the terms of the contract.