Futures contracts do not have time decay in the way options do. There’s no theta eating away at a premium each day, because a futures contract isn’t a premium-priced right that can expire worthless — it’s a binding obligation to buy or sell at a set price. But time still costs money in futures. It shows up through carrying costs baked into the contract price, through basis convergence as expiration approaches, and through the price you pay to roll a position forward. Whether those effects work for you or against you depends on the shape of the forward curve when you enter.
Why Options Decay and Futures Don’t
An option is a right. You pay a premium for the possibility that the underlying moves in your favor before expiration, and every day without that move erodes what you paid. If the underlying goes nowhere, the option eventually reaches zero and your entire premium is gone.
A futures contract is an obligation. Both sides must settle at expiration, either through physical delivery or cash settlement. There’s no premium to decay because you didn’t buy a right; you entered an agreement. If the underlying is worth $50 at expiration, your contract settles at $50, and your gain or loss depends on where you entered, not on how long you held.
The practical difference shows up in sideways markets. An options trader who is right about direction but wrong about timing can lose everything. A futures trader in the same scenario roughly breaks even on price and pays only the carrying-cost differential, which is usually a fraction of a percent per month rather than a steep daily erosion. The trade-off: futures expose you to the full downside without the capped-loss protection an option premium buys.
Cost of Carry: How Time Enters the Futures Price
The link between futures prices and time runs through the cost-of-carry model. If you could buy a commodity today and store it until a future delivery date, you would rack up real expenses along the way, and those expenses get built into the futures price. The standard relationship: futures price equals current spot price, plus storage costs, plus the interest cost of tying up capital, minus any convenience yield from holding the physical commodity now.
Storage costs are concrete. For wheat futures on the Chicago Board of Trade, the exchange sets maximum storage charges through a Variable Storage Rate mechanism. As of March 2026, the maximum rate for Chicago SRW wheat is about 5 cents per bushel per month, while Hard Red Spring wheat runs about 11 cents per bushel per month.1CME Group. Variable Storage Rates (VSR) Those costs accumulate daily. A contract expiring in six months carries roughly six months of storage; a contract expiring in two weeks carries almost none.
The financing component works the same way. Buying a physical commodity today ties up capital, and that capital has an opportunity cost. The Secured Overnight Financing Rate, which replaced LIBOR as the benchmark for U.S. dollar lending, typically serves as the reference rate for this calculation.2Board of Governors of the Federal Reserve System. Inferring Term Rates from SOFR Futures Prices As days to delivery shrink, so does the financing charge embedded in the futures price. This is the closest thing futures have to time decay: a gradual, predictable reduction in carrying costs as expiration nears. Unlike theta, though, this reduction reflects real economic costs disappearing, not a speculative premium evaporating.
Basis Convergence: What Actually Happens Near Expiration
Basis is the gap between the spot price and the futures price. Before expiration, that gap can be positive or negative depending on supply, storage costs, and expectations. As the delivery date arrives, the gap closes. This process, called convergence, is driven by arbitrage: if the futures price at expiration were meaningfully above the spot price, a trader could buy the physical commodity, sell the futures contract, and lock in a risk-free profit. That pressure pushes the two prices together.
The Commodity Exchange Act establishes futures markets as instruments for price discovery, and convergence is essential to that function.3GovInfo. Commodity Exchange Act [As Amended Through P.L. 119-27, Enacted July 18, 2025] On the final settlement day, the futures price equals either the cash market price (for physically delivered contracts) or a benchmark settlement value (for cash-settled contracts).4CME Group. Cash Settlement vs. Physical Delivery Convergence isn’t a legal guarantee, but it’s a reliable economic mechanism reinforced by exchange rules.
Contango vs. Backwardation: Which Way Time Pushes You
The direction of the basis determines whether time is a headwind or a tailwind. In contango, futures prices sit above spot, which is the normal state for many commodities because it reflects the cost of carrying inventory. In backwardation, futures prices sit below spot, usually because immediate demand for the physical commodity is high enough to flip the relationship.
If you’re long futures in a contango market, convergence works against you. Your contract was priced above spot, and as expiration approaches, that premium melts away. Even if the spot price holds perfectly steady, your contract drifts down toward it. The economic effect feels a lot like time decay, even though the mechanics are different.
The reverse applies in backwardation. A long position benefits as the below-spot futures price rises to meet the cash market. Here, time is a tailwind. Whether you experience a drag or a boost depends entirely on the shape of the forward curve when you enter.
Roll Costs: The Recurring Bill for Staying In
Most futures traders never intend to take delivery. They close the expiring contract and open a new one in a later month. This is called rolling, and for most major contracts, the bulk of open interest rolls during the last ten business days before the contract month begins.5CME Group. Pace of the Roll User Guide
In a contango market, every roll means selling the cheaper near-month contract and buying the more expensive far-month contract. That difference is a real, recurring cost. If crude oil is at $70 for the front month and $71 for the next, you lose $1 per contract on the roll. Month after month, the cumulative drag can be substantial even if spot trends sideways. Commodity ETFs that hold continuous long exposure are especially vulnerable, because they roll mechanically on a schedule.
In backwardation, the math reverses: you sell the higher-priced near-month and buy the cheaper far-month, pocketing the difference. This positive roll yield was a significant return driver for commodity index strategies during periods of persistent backwardation in energy markets.
Exchange fees pile on top. As of March 2026, CBOT charges electronic trading fees of $0.56 per contract for soybean futures, $0.31 for E-mini Dow futures, and $0.14 for 10-year Treasury futures.6CME Group. CBOT Fee Schedule Rolling means two transactions per cycle, so the fees double. For someone rolling a Treasury position monthly, the exchange fee alone comes to about $3.36 per contract per year, before your broker’s commission. Modest compared to roll yield effects, but guaranteed.
Don’t Miss the Delivery Window
If you don’t roll in time, you can end up in the delivery process. For NYMEX metals contracts, First Notice Day falls on the last business day of the month before the delivery month.7CME Group. Chapter 7 Delivery Facilities and Procedures After that date, short position holders can issue delivery notices, and the clearinghouse assigns them to longs. Physical delivery then follows a three-day cycle in which the short declares intent, the long receives notice and an invoice, and the clearinghouse transfers shipping certificates and funds.8CME Group. Futures Delivery and Load-Out Procedures: Effects on Contract Performance A retail trader who ignores First Notice Day can end up obligated to accept 5,000 bushels of corn or 1,000 barrels of oil.
Time and Margin: Not Decay, but Not Free
Holding a futures position doesn’t require paying full contract value, but it does require posting margin, which the exchanges call a performance bond. Initial margin for major contracts typically runs in the single-digit percentages of notional value. A CME advisory from January 2026 showed gold futures at 6 percent initial margin, with maintenance margin at the same level or slightly below. Energy and agricultural contracts can run higher depending on volatility.
If the market moves against your position and account equity drops below the maintenance level, your broker issues a margin call. Federal regulations require security futures intermediaries to take steps to liquidate undermargined positions “promptly and in an orderly manner” when there’s a deficit.9eCFR. 17 CFR 242.406 – Undermargined Accounts Most brokers give you until the next business day to deposit funds, but they aren’t required to wait. During fast markets, liquidation can happen without notice.
This is where time still bites, even without decay. An option buyer’s maximum loss is the premium paid. A futures trader’s losses are theoretically unlimited, and margin calls can force you to add capital or get closed out at the worst moment. The longer you hold, the more opportunities the market has to move against you temporarily, which means longer holding periods demand more capital buffer even if your long-term thesis is right. Time doesn’t erode the contract’s value, but it does increase the odds that you’ll need to weather a margin call along the way.