What is a Rollover Position?
Rollover in trading refers to shifting a futures position from a contract nearing expiration to a new contract with a later expiry. This involves closing the current-month contract and opening a similar position in a contract expiring in a different month. Rollover is applicable only to futures contracts and not to options.
Here's a detailed breakdown of rollover:
1. Process:
o Closing Current-Month Contract: The trader closes the position in the futures contract that is nearing expiration.
o Opening New Contract: The trader simultaneously opens a new position in a futures contract with a later expiration date.
2. Purpose:
o Avoid Settlement: To avoid the physical or cash settlement of the contract that is about to expire.
o Maintain Market Position: To continue holding the market position without interruption.
3. Application:
o Futures Contracts: Rollover is only applicable to futures contracts and not to options. Traders use rollovers to extend their exposure to the underlying asset without having to settle the expiring contract.
Example Scenario:
· Futures Contract: An investor holds a long position in the July futures contract of Company XYZ, which is about to expire. To roll over, the investor sells the July futures contract and buys the August futures contract.
To access the Rollover Position feature:
· Navigate to the trading Application.
· Select "Books" from the menu.
· Click on "Position."
· Choose the option to "Roll."
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