The process of closing a position in a near-expiry futures contract and opening a new position in a later-dated contract to maintain the same market exposure.
Why It Matters
- 1Futures contracts have expiration dates, so traders must roll over positions to avoid settlement or expiration.
- 2Proper rollover ensures continuity in trading strategies and avoids disruptions or unexpected outcomes.
Example
- 1A trader holds a position in a March futures contract approaching expiration.
- 2Before it expires, they close that position and open a similar position in the June contract to stay in the trade.
Common Mistakes
- ✖Forgetting to roll over before contract expiration
- ✖Ignoring price differences between contracts (spread)
- ✖Assuming rollover is automatic in all platforms
- ✖Holding contracts into expiration without understanding settlement terms