The concept of rollover is unique to the futures market. Since futures contracts trade for a specific amount of time before they expire, understanding futures rollover and when to shift to a later contract is crucial for futures traders.
Simply put, “rolling over” a position means taking the same position in a contract with a later expiration date.
See why futures rollover is so important in this 3-minute video:
What is Futures Rollover?
“Rollover” refers to when a futures trader stops trading the current contract and begins trading the succeeding contract. For example, crude oil futures (CL) expire monthly and traders shift to the following month’s contract around the middle of the current month.
“Rolling” refers to when a trader closes a trade in the current month and opens the same position in the next month. For example, a trader long one CL contact in November will rollover by closing the position and opening the same position in the December contract.
- Reminder: Make sure you know the expiration date of the contract you are trading. If you fail to roll over or close the position, it will be physically delivered or cash-settled.
Typically futures brokers & clearing firms will not allow delivery of physical commodities, nor do traders typically intend for futures delivery. Regardless, to avoid risk of a potential delivery, traders must roll to a succeeding contract before the contract expires.
How Do I Know When It is Time to Roll?
While certain markets such as equity index (E-mini & Micro E-mini) futures have set roll dates on the CME’s website, not all markets have specific roll dates.
Ultimately it is up to the individual trader when to roll based on factors including volume, liquidity and time remaining till expiration.
First Notice & Last Trade Date
Traders of physically deliverable futures contracts should also be aware of the following 2 dates:
- First Notice Date – the first day the exchange can assign physical delivery to investors of futures contracts
- Last Trade Date – the last trading day of a futures contract before delivery of the underlying asset must take place
Trading of physical commodities is prohibited from the business day preceding the earlier of the two dates above through the Last Trade Date.
NinjaTrader’s Trade Desk Calendar
Bookmark NinjaTrader’s Trade Desk Calendar and stay current on futures last trade dates, first notices, roll dates and contract expirations, as well as other important dates including employment reports & FOMC meetings all in one place!
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