First Notice Day

First Notice Day - Magickal Mirror angel by Anne Stokes
First Notice Day

The first day notice is an announcement on the first day of the applicable period that a seller intends to deliver a commodity under a futures contract. Some exchanges require the first day notice to be given one day prior to the expected delivery date.

There are various reasons for investing in a futures contract. Depending on the investment goal, the first day notice can be either something that completes the transaction, or is a problematic event in an investment gone awry.

Typically, the seller of a commodity uses a futures market to lock in a future price for delivery of their commodity. This helps in planning and reduces risk and uncertainty.

Likewise, buyers of the commodity can use futures market to reduce the uncertainty of a future commodity price. However, investors can also invest in futures contracts for speculative reasons alone, with no intention, and indeed no capacity, to take delivery.

In doing so, they provide for greater market liquidity and depth, and also use all available market, climate, supply, and demand information in determining the value of contracts to deliver commodities on a given date. Consideration of all available information contributes to market efficiency and hence assists commodity buyers and sellers alike in reducing uncertainty.

As a contract future date nears, the spot price and the future price of the contract narrows. A speculating investor who still holds the right to purchase the commodity on a given date typically will attempt to sell this contract before the date arrives.