What is Rollover in futures trading?

Follow

In the world of futures trading, “Rollover” refers to the process of closing out all positions in soon-to-expire futures contracts and opening new contracts in newly opened futures contracts. The concept of rollover is unique to different futures contracts covering the markets and the rollover has a significant impact on the contract and the market’s volatility, price and volume.

Not all futures rollovers happen at the same time and therefore futures day traders need to keep a close eye on the rollover dates of the contracts that they are trading. Usually, the days leading up to the futures contract’s rollover date is important from a risk management standpoint and duly deserves the full attention of the investors who are engaged in trading the contract.

The closer it gets to a contract’s expiry or rollover, the bigger the challenges that come with it. Rollover in futures is a key aspect that needs to be accounted for and there is no way to getting around it unless you close the position within the active monthly or quarterly contract that you trade. Because a futures contract is finite in duration, there are a few key dates that active traders need to be aware of:

1055120-512-2.png

Expiration day:
The last day that a futures contract is binding. After expiration, a futures contract is no longer valid.

1055120-512-2.png

Last trading day:
The last day when a futures contract can be traded. After the last trading day, delivery of the underlying asset or cash settlement must transpire.

Before a rollover event, NAGA Markets send this info via e-mail to users.

WHY DO FUTURES CONTRACTS HAVE A ROLLOVER?


WHY DO FUTURES CONTRACTS HAVE A ROLLOVER?

Futures contracts, as you might know, are derivatives which track the prices of the underlying market. A futures contract is simply a hedging tool where a buyer and seller agree to buy or sell a certain number of units in a commodity or an asset at a certain price for a future date of delivery. Most traders in the futures markets today typically use it to hedge against market exposure, so most of the trading is done for speculative purposes only rather than taking physical delivery of the asset.

Do you want to know what is the Swap?

 


1055095-512.png

If you need further assistance, please do not hesitate to contact our staff.

1055095-512.png    Did you know? 

With the NAGA Coin, NAGA aims to establish the world’s first crypto-gateway to trade stocks, CFDs, ETFs, and any other sort of financial instruments and virtual goods on a global scale in a secure and transparent way with NAGA Markets and NAGA Trader. NAGA shall become the trading platform for any financial or virtual product of the future. It’s time for you to be able to buy any stock or game item with your NAGA Coins or other cryptocurrencies, let a personalized and unique robo-advisor, called CYBO, invest for you, and build your financial wealth with full transparency and efficiency with low or no transaction costs.
0 out of 0 found this helpful

Comments

0 comments

Please sign in to leave a comment.