Question

What does "generic first futures" or "rolling first futures" mean?

Answer 1

Rolling over the futures contracts to switch from the front month contract that is close to expiration to another contract in a further-out month. Futures contracts have expiration dates as opposed to stocks that trade in perpetuity. They are rolled over to a different month to avoid the costs and obligations associated with settlement of the contracts. Futures contracts are most often settled by physical settlement or cash settlement.

Non-financial commodities such as grains, livestock and precious metals most often use physical settlement.The short position delivers the underlying asset to the long position. The holder of the long position must place the entire value of the contract with the clearinghouse to take delivery of the asset.Being this process bit of cost consesive and also tidious the traders do thr roll over of the current contract with the next future.