Futures and Options expire on a certain day, at the end of which the “settlement” process happens. In this process, the closing prices of the day are settled against the outstanding futures or options contracts.

This is usually the last Thursday of a month. If that day is a holiday, then the next working day is taken as the expiry day.

You would assume that if that is so, the expiry date must be a working day, right?

Not quite so fast. NSE reports that “28 July 2005″ was the expiry day for the July 2005 contracts. Yet, that day seems to have been an NSE holiday! The contract ACTUALLY expired on 29 July 2005, but for all data that you can get, including futures and options (historical) quotes, the expiry date is given as the 28th.

The problem is: If you have a strategy that involves transacting on the expiry day, you can’t back test it for this month in any simple manner. For instance, I was recently checking out how certain options mature on expiry, and on this date my code just went into the deep blue ocean. Because there was no Nifty price on the expiry date! I had to work around it by modifying the code to consider the last known contract price instead.

All the strategies you can think of will fail if your data is bad; and cleaning up data is a massive process, repeated perhaps by every trader using a technical analysis software package. Maybe there’s a simple way to consolidate this, like a community effort where all of us benefit. At least we can start noting down problems with data that all of us face.