Rollover in futures trading is important because it allows traders to extend their position from the current month contract to the next month without booking profit or loss. This helps traders continue holding their view on the market without any break. Rollover also shows market sentiment, whether traders are bullish or bearish going into the next expiry.
What is Rollover in Futures Trading?
Rollover in futures trading means closing your position in the near-month contract and opening the same position in the next-month contract. It is done before expiry to continue your trade without interruption. For example, if you have a position in the October contract, you roll it over to the November contract.
Why is Rollover Important in Futures Trading?
Rollover is important because futures contracts have an expiry date. If traders want to hold their position longer, they must roll it over. It avoids forced exit at expiry and helps maintain the same market view in the new contract. It also helps in tracking market trends across months.
How Does Rollover Reflect Market Sentiment?
Rollover data shows whether traders are carrying forward long or short positions. If more traders roll over long positions, it means bullish sentiment. If they roll over short positions, it means bearish sentiment. Analysts use rollover percentage to understand trader behaviour before expiry.
When Should You Rollover a Futures Position?
You should rollover your position close to expiry, usually in the last week before the contract ends. Traders watch liquidity in the next-month contract before rolling over. The decision depends on your market view and if you want to keep your trade open longer. It's also important to check the cost of rollover before doing it.
What is the Cost Involved in Rollover?
The cost of rollover includes the price difference between the current and next-month contracts. This is called the cost of carry. It also includes brokerage and taxes. Traders should check if the rollover is worth it based on their expected gains from continuing the trade.
Should Beginners Use Rollover in Trading?
Beginners can use rollover if they understand futures trading well. It is better to learn how expiry, margin, and rollover costs work first. Rollover is useful, but beginners should avoid rolling over trades without a strong reason or strategy. Practice and research are important before using rollover regularly.
Contact Angel One Support at 7748000080 or 7771000860 for mutual fund investments, demat account opening, or trading queries.
© 2024 by Priya Sahu. All Rights Reserved.
