Rolling Futures Contracts

Because every futures contract expires, anyone who wants to hold a position longer than one contract's life must roll it: close the expiring contract and open the same position in a later month. Rolling is routine for index futures traders, commodity funds and hedgers. Done well, it is cheap and smooth. Done carelessly, it can mean trading in thin markets, paying wide spreads or accidentally ending up in the delivery process.

How a roll works#

To roll a long position, you sell the near contract and buy the far contract. To roll a short, you buy the near and sell the far. The two trades can be done separately or, better, as a single calendar spread order.

When to roll#

Watch volume and open interest: when the next contract's volume overtakes the expiring one, liquidity has moved. See First Notice Day and Last Trading Day and Options Open Interest Analysis.

Why use a calendar spread order#

• One price: avoids moving markets between legs, known as leg risk.
• Tighter costs: exchanges list spread markets with their own order books, often with narrow spreads.
• Lower margin during the roll.

Roll costs and roll yield#

The price difference between months is not itself a gain or loss; it reflects carry. But over time, rolling in a contango market costs money when spot is flat, and rolling in backwardation earns money. This is roll yield. See Roll Yield, Contango and Backwardation.

Explicit costs include commissions and exchange fees for both legs and the bid ask spread of the spread market. See Roll Costs.

Roll schedules for funds and indices#

Commodity index funds publish roll schedules. For example, the S&P GSCI has historically rolled over the fifth to ninth business days of each month, a period known as the "Goldman roll". Because these rolls are predictable and large, some traders try to front run them, which can widen spreads during roll periods. Many funds now spread rolls over more days or use later months to reduce this. See Continuous Futures and Back-Adjustment.

Choosing which month to roll into#

Not every roll has to go to the next month:

• Liquidity: the next month is usually most liquid.
• Curve shape: in steep contango, rolling to a later month can reduce roll costs.
• Seasonality: in commodities like natural gas, different months behave very differently. See Seasonality in Commodities.
• Hedging needs: match the contract to the timing of the exposure being hedged.

Rolling options on futures#

Options on futures are tied to specific underlying contracts. Rolling a futures position does not roll related options; they must be managed separately, and options may expire before the futures do.

Common mistakes#

• Forgetting to roll and entering the delivery process.
• Rolling legs separately in a fast market.
• Rolling at the last minute when liquidity has already moved.
• Treating the calendar spread price as a loss instead of carry.

Frequently asked questions#

What does it mean to roll a futures contract?#

To close a position in an expiring contract and open the same position in a later contract month, keeping exposure continuous.

When should I roll E-mini S&P 500 futures?#

Usually about a week before expiry, around CME's roll date, when volume shifts to the next quarterly contract.

Does rolling futures cost money?#

There are commissions and spread costs, and in contango markets rolling tends to reduce returns over time if spot prices stay flat.

Next, learn how the shape of the curve affects returns in Roll Yield.