Rollover & basis
What is a Convergence Trade and how does it ensure that futures price meets spot price at the exact moment of contract expiration?
By Easy Money Scanner · Educational reference · Not investment advice
The short answer
A convergence trade exploits the guaranteed narrowing of futures and spot price gaps as expiration approaches, since arbitrage forces futures price to equal spot at settlement.
How it works
Traders may buy the cheaper asset and sell the more expensive one, expecting the spread to close by expiration, though execution risk and financing costs can erode theoretical profits.
An example
Buy spot, sell futures before expiration convergence.
Risk & limitations
Convergence timing and margin calls can disrupt expected profit.
Examples are hypothetical, not trade recommendations. US contract and regulatory references do not automatically apply in Canada. Rules, margin requirements and broker policies can change; confirm them with the relevant authority and your broker.