Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Broken Date

What it is:

In the finance world, broken dates are arbitrary maturity dates that do not necessarily correspond to the duration of the bond, option, futures contract, forward contract, or other maturing instrument. Broken dates are also called odd dates.
 

How it works (Example):

For example, let’s assume that a futures contract for shares of Company XYZ is three months long and is issued on April 1. The standard maturity date would be 90 days from issue, or July 1. However, if the contract has a broken date, it might mature on, say, June 28 or July 2. Alternatively, it might mature in, say, five weeks when the industry standard is 12 weeks.

Why it Matters:

The finance world depends heavily on standardized maturities for certain types of contracts. This in turn creates standardized recordkeeping and reporting for investors and the rest of the financial world, and it makes trading easier. When a contract has a broken date, it is sort of a “rogue” investment and requires extra care both by the financial services firms involved and the investor who holds the security. However, contracts with broken dates can be highly advantageous if an investor expects the optimal price of the underlying security to happen at a time in between the standard contract dates. 

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