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When rolling over positions in different futures contracts of the same underlying asset, compensating result adjustments are applied* to eliminate the impact of price differences between the contracts.
These adjustments, commonly referred to as "rollover adjustments," are added or subtracted from the position's result. Their purpose is to maintain the same overall result for the position after the rollover, regardless of the price disparity between the current and next futures contracts.
This is a detailed example of how the rollover works 👇
You hold a `BUY` position of 100 quantity of Oil futures with an average price of $50.
Oil futures rates at the time of rollover are:
- Current contract buy price = $50.50
- Current contract sell price = $50.45
- New contract buy price = $52.50
- New contract sell price = $52.45
The price differences of the contracts, in general, are calculated as follows:
Sell price difference = (New contract sell price) - (Current contract sell price) = $52.45 - $50.45 = $2
Buy price difference = (New contract buy price) - (Current contract buy price) = $52.50 - $50.50 = $2
We can now calculate the Result Adjustments of individual positions:
BUY position result adjustment = - [(Quantity) * (Sell price difference)]
SELL position result adjustment. = [(Quantity) * (Buy price difference)]
Given that the position you hold in this example is a `BUY` position of 100 quantity, we will use the first formula to calculate its adjustment:
BUY position result adjustment = - [(Quantity) * (Sell price difference)] = - (100 * $2) = - $200
To double-check that the Result adjustment of the position after the rollover is correct, we will calculate its result before the rollover and after the rollover without taking into account the adjustment of the result:
Before the rollover: Quantity * (Current contract sell price - Average price) = 100 * (50.45 - 50) = $45
After the rollover: Quantity * (New contract sell price - Average price) = 100 * (52.45 - 50) = $245
We can see that the difference is exactly $245 - $45 = $200, so we can confirm that the Result adjustment of - $200 of the position due to the rollover is correct ✅.
📄 NOTE
When using the Aggregating mode with Auto Rollover enabled for futures CFDs, if you have open positions in both the current (near month) and the next (far month) futures contracts of the same underlying asset, please be aware of the following:
On the Rollover date, the expiring near month position will be automatically closed at the market price at the time of expiration. However, a new position in the subsequent far month contract will not be automatically opened. You will need to manually rollover the expiring position if you wish to maintain exposure in the futures CFD. This manual rollover will not impact your existing position in the far month contract.