The practice of “rolling over” is a distinctive feature of the futures trading landscape. Futures contracts have a limited trading duration which ends on an expiry date.
So, it’s vital for traders of this type of instrument to fully understand how futures trading works and when and how to rollover futures contracts.
In essence, to “roll over” a position is to transfer it to a contract that has a later expiration date.
See why futures rollover is so important in this 3-minute video:
What is Futures Rollover?
Defining Futures Rollover: The term “rollover” is a reference to when futures traders typically switch from the contract being currently traded, to a contract with a later expiry date.
For example: Crude oil futures (/CL) have monthly expirations. Traders typically roll to the next month’s contract around the mid-point of the current month.
The act of “rolling” typically refers to a futures trader closing any open trades on one contract, and opening the same position on a later month. For instance: a trader holding a long position in one CL contract for November will execute a rollover by closing this position and opening an identical one in the December contract.
Remember: Being aware of your contract’s expiration date is crucial. Neglecting to roll over or terminate the position can result in physical delivery or cash settlement of the contract.
Generally, futures brokers and clearing houses prevent the physical delivery of commodities, and traders usually do not aim for the delivery of futures. To negate the risk associated with potential delivery or having your position settled by your broker, it’s important to be aware of contract expiration dates and manage your positions accordingly.
How Do I Know When It is Time to Roll?
One of the most common questions in futures trading is “When should I rollover?”
While specific markets, like equity index futures (E-mini & Micro E-mini), have predetermined roll dates listed on the CME’s website, not every market is marked by explicit roll dates.
The decision of when to roll over is thus left to the trader’s discretion, influenced by factors such as volume, liquidity, and the time until expiration.
For specific rollover dates, see:
Futures Contract Rollover Dates Calendar Spreadsheet
Aside from avoiding potential issues with physical delivery or being automatically cash settled, most futures traders generally want to be trading on the contract with the most liquidity, which would mean the most volume.
It’s important to keep rollover dates in mind to make sure you are always trading the most liquid contract.
First Notice & Last Trade Date
Traders dealing with physically deliverable futures instruments (e.g. gold, oil, etc.) should also keep in mind two critical dates:
– First Notice Date: This is the earliest day the exchange can assign physical delivery to investors of futures contracts.
– Last Trade Date: This is the final day a futures contract can be traded before delivery of the underlying asset must take place.
It’s prohibited to trade physical commodities from the business day preceding the earlier of these two dates through the Last Trade Date.
Risk Disclosure:
Futures and Forex trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment. Risk capital is money that can be lost without jeopardizing one’s financial security or lifestyle. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Past performance is not necessarily indicative of future results.
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