Trading

Equity
Commodity
Currency
What Is ‘Rollover’ In the Stock Market?

Rollover means carrying forward a contract position to another expiry date. Know the details here.

If the trader feels that there is too much loss to be incurred on a contract and does not want to exercise it, he can choose to rollover.

When it comes to the futures market the price movements can be quite volatile and unpredictable. If the prices are moving up rapidly one day, there are chances that they might go down the very next day.

A futures contract is all about predicting the future price movements of the stocks. Since the market is so volatile, many a times the prices might not move in the expected direction. In such a scenario, traders participate in a 'rollover' to avert potential loss.

Rollover, in layman's language, is carrying forward. Any futures contract in the Indian stock market expires on the last Thursday of every month. These contracts usually get squared off or exercised on the last day at the price prevailing in the market. However, if the trader feels that there is too much loss to be incurred and does not want to exercise the contract, he can choose to rollover. This mean she can opt to carry forward the positions or enter into a similar contract expiring at a future date.

Example:

Let us understand the concept better with the help of an example. Say a trader holds 10 long futures contracts of ABC company expiring on the last Thursday of October. If he decides to rollover, he will square off his position and buy 10 futures contracts of the same company; however, the new contract will expire in November.

When can a trader rollover?

While many traders opt to rollover on the day of expiry, it is not mandatory. Rollovers usually start a week before the expiry date, and can be done until last minute of the market hours on the expiry day.

Disclaimer:

This article (“Article”) is licensed to or is the property of Religare Corporate Services Limited (“RCSL”, which would mean to include its group companies, wherever applicable). This Article should not be reproduced or redistributed to any person or in any form in whole or in part without prior and explicit written consent of RCSL. This Article reflects the views of the author or content provider, and RCSL disclaims all liability, whatsoever, arising out of the substance or contents of this Article or in connection thereto, including any matter relating to infringement of intellectual property rights. This Article is purely for the purpose of public awareness and education and any reference to any financial product should not be construed as an offer or solicitation of an offer to buy or sell any securities, financial instruments or insurance. RCSL does not guarantee the accuracy or completeness of the information contained herein and there can be errors both typographical and in content. The Article may be referred only as a general guide and not as the ultimate source of the subject matter discussed. The Article must not be relied upon for taking personal, medical, legal or financial decisions and an appropriate professional must be consulted for specific advice tailored to specific situations. RCSL and any persons connected thereto do not accept any liability arising from the use of this Article. This disclaimer forms a part of, and should be read in consonance with, the Terms and Conditions of this site.

Copyright 2012 Religare. All rights reserved. Trademarks are the property of their respective owners.

This site is best viewed with Internet Explorer 7.0 or higher; Firefox 2.0 or higher.