Contract Month

  

Categories: Derivatives, Stocks

If you’re an options trader, you’re going to want to know the contract date. Because the month listed on that contract is when it expires, and it's time to get the delivery done.

Let’s say that you’re selling corn for September delivery with a call option at $4.00 per bushel, right around the time that harvest has started. The contract expires during the third Friday of the month, and now you have to settle that contract and ensure that you get all that corn off your farm.

So that you know, different months have different codes ahead of the commodity contract. It's not supposed to make any sense, just to warn you.

Contract Month Options Code

January F
February G
March H
April J
May K
June M
July N
August Q
September U
October V
November X
December Z

Different commodities have different delivery months, depending on a variety of factors. Certain grains may coincide with different months in the growing cycle. For example, primary soybean trading months are January, March, May, July, August, September, and November. However, wheat and corn contracts are set for delivery in March, May, July, September, and December.

Related or Semi-related Video

Finance: What Is a Put Option?83 Views

00:00

finance a la shmoop what is a put option? hot potato hot potato

00:07

ow ow! yeah remember that game well nobody wanted the potato, poor thing. the

00:11

players wanted to put it in someone else's hands. well put options kind [glue put around a flaming potato]

00:18

of work the same way. a put option is the right or option or choice to sell a

00:24

stock or a bond at a given price to someone by a certain end date.

00:29

all right example time. you bought netflix stock at the IPO a zillion years

00:37

ago at $1 a share. that's you know splits adjusted. all right now it's a hundred

00:42

bucks a share. if you sell it you pay taxes on a gain of 99 dollars a share. in

00:49

California that would be a tax of something like almost 40 bucks. well the

00:53

stock was a hundred but you keep only something like 60. feels totally unfair.

00:58

right so you really don't want to sell your stock but you're nervous about the [graph shown]

01:04

next few months that Netflix will crater for a while and go down ten

01:07

maybe twenty dollars. longer term though you think it'll hit 300. so this is the

01:13

perfect setup to maybe look at buying some put options on Netflix. if the stock

01:18

goes down your put options go up. with Netflix volatile but at a hundred bucks

01:23

a share ,you look up the price of an $80 strike price put option expiring in

01:28

December, and you know that's mid-september now .for five bucks a share

01:33

you can protect your stock for the next few months .think about it like temporary [stocks placed in vault]

01:37

term life insurance. you pay the five dollars a share in the stock goes down

01:41

to 82 by mid December, worst of all worlds. well not only did you lose the $5

01:48

a share but your stock has lost $18 in value. but had Netflix really cratered

01:55

and gone to say $60 a share well you would have exercised your put and sold

02:01

your shares at 80 bucks. well those put options you paid $5 for

02:06

would be been worth 15 bucks a share. in buying that put option you've [equation shown]

02:11

guaranteed that your loss will be no more than a $75 value for your Netflix

02:16

position at least for that time period and ignoring taxes. well remember that

02:21

options expire after December whatever like the third Friday of the month it's

02:26

usually when options expire, you then have no protection and your shares float

02:31

along naked. naked? really who knew accounting could get so [paper put option goes "skinny dipping".]

02:36

raunchy. yeah well that's naked put options.

02:40

that's what they really are people.

Up Next

Finance: What Is a Call Option?
25 Views

What is a call option? A call option is a type of contract that lets the investor buy shares of a stock at a certain price and within a window of t...

Find other enlightening terms in Shmoop Finance Genius Bar(f)