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| Last Notice Day |
The last possible day to give the exchange due notice of intention to deliver the underlying asset of a futures contract is termed last notice day (Hull, 2006). A commodities futures contract is not based on a fixed delivery date but on a delivery period that usually spans the whole contract month.
Hence the day of delivery notice may be chosen by the holder of the short position. The last opportunity to do so, that is, the last notice day, is generally a few days after the last trading day and 1–7 days before the last business day of the delivery month.
The dates vary according to the exchange and the underlying asset. For instance, at the Chicago Board of Trade the last notice day “shall be the business day prior to the last business day of the delivery month.”
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It generally takes 2 or 3 days from the issuing of notices of intent to deliver to the delivery itself. Usually, the exchange acts according to the rule of assigning notice of intention to deliver to the party with the oldest outstanding long position.
Investors who are not willing to take delivery should close out their positions before first notice day, as delivery must be met if notice of intention to deliver is given to the exchange.
