What is a rollover and why does it happen?

May 8, 2016

Rollover is the process of switching a CFD (contract for difference) position from a Futures Contract that is expiring to the new “Front Month” Futures Contract.

Every Futures Contract has an expiry date. These are set by the respective Exchange where it is traded. To keep a position open, you have to roll that position over to the new contract when the old contract expires. The alternative is to close the position before the rollover date. Futures Contracts expire on a monthly basis (typically 3 months) and so rollovers will occur on any CFD’s that Fortrade price off Futures Contracts. These include the CFD’s of bonds, indices, metal, energy, and agriculture commodities.

The contract rollover charge/credit reflects the difference between the price of the old and new contracts (also known as the Rollover Rates).

For example:

  1. If a trader has on open LONG or BUY position, and the new contract price is LOWER than the old contract closing price, Fortrade will CREDIT the trader with the difference.
  2. If a trader has an open LONG or BUY position, and the new contract price is HIGHER than the old contract closing price, Fortrade will DEBIT the trader with the difference.

As a futures contract expires, Fortrade will automatically roll over all customers open positions to the new contract. The future rollover dates can be found on the Fortrade website (these follow exactly the rollovers of the relevant Exchanges).The difference of the prices between the two contracts is calculated in the underlying currency of the instrument and then automatically converted to the base currency of the customers trading account.

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