Rollover

Rollover has two common meanings in trading. In futures, it means closing a position in a contract that is about to expire and opening the same position in a later month, so you stay exposed without dealing with expiry. In forex, it means carrying a position past the daily cut off, which triggers a small interest payment or charge called a swap. Both affect your costs and results, especially for positions held more than a few days.

Futures rollover#

Futures contracts expire on set dates. A trader who wants to keep a position for longer must roll it.

When to roll#

Most traders roll when trading volume shifts from the expiring contract to the next one, typically about a week before expiry for stock index futures. For physically settled commodities, the roll happens earlier, before the first notice day, to avoid delivery obligations. Exchanges and data vendors publish roll calendars. See Rolling Futures Contracts and First Notice Day and Last Trading Day.

Rolling all at once or with a spread#

You can roll with two separate orders, or as a single calendar spread order that buys one month and sells the other at a set price difference. The spread order removes the risk of the market moving between your two orders and often has a tighter bid ask spread. See Calendar Spreads in Futures.

What the roll costs or earns#

When later contracts trade above nearer ones, a market in Contango, a long position rolled forward repeatedly pays the difference over time. When later contracts trade below, in Backwardation, rolling a long position can add return. This effect, called Roll Yield, is why commodity ETFs holding futures can perform very differently from the spot price over months and years. See also Roll Costs.

Forex rollover and swaps#

Spot forex trades settle two business days after the trade. Retail brokers do not deliver currencies, so at the daily cut off, usually 5:00 p.m. New York time, they roll open positions forward. Because you are effectively holding one currency and borrowing another, you earn interest on one and pay interest on the other.

Positions held over a Wednesday night usually incur triple swap, covering the weekend, because of how spot settlement dates fall. See Rollover and Swap in Forex and Carry Trades in Forex.

Rollover in other products#

• CFDs charge or credit daily financing on positions held overnight, similar to forex swaps. See Financing and Overnight Costs.
• Crypto perpetual futures have no expiry, so there is no roll. Instead, traders pay or receive funding every few hours, which does a similar job of linking the price to spot. See Funding Rates.
• ETFs and funds that hold futures roll on their own schedule, which affects their returns.

Common mistakes#

• Forgetting expiry and being closed out or facing delivery.
• Ignoring roll costs in long term futures or commodity ETF positions.
• Holding forex positions with negative swap for months without counting the cost.
• Rolling with two market orders in a thin market, paying spread twice.

Frequently asked questions#

What is rollover in futures trading?#

It is closing a position in an expiring futures contract and opening the same position in a later contract month to maintain exposure.

Why was I charged a swap on my forex trade?#

Because you held the position past the daily rollover time. The swap reflects the interest rate difference between the two currencies plus your broker's markup.

Is rolling futures a cost?#

The price difference between months is not a fee, but repeatedly rolling in a contango market reduces returns for long positions, and each roll adds trading costs.

Sources#

• Wikipedia, Rollover (finance)