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:
· Login to 5paisa trading web or mobile app.
· On app - Select "Books" from the menu. > Click on
"Position."
· On web - Select Orders and position from left menu's > Click on
Position."
· Choose the option to "Rollover."
·Details will be visible like Qty, Contract, Buy and sell with a place button
Note:
Users have the option to roll over their positions before or on the expiry date. It's important to note that the rollover feature is exclusively applicable to future contracts. The existing contract is closed out, and concurrently, a new position is initiated in the subsequent contract.