CONVERGENCE

9 May 2016 By PDSNET

When futures prices and spot prices come together at the futures expiration. Futures contracts expire at the end of each quarter - in other words at the end of March, June, September, and December. The further away they are from their expiry date the greater will be the "time value" associated with the future and hence the gap between the spot price and the future price. On expiry these two prices converge until they are the same on the day that the contract expires.



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