CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 79% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
When futures contracts expire, open positions are transferred to the next available contract. Since the price of the new contract is usually different from the expiring one, a rollover adjustment is applied to ensure that your overall profit or loss remains unchanged.
How do rollover adjustments work?
A rollover adjustment is a small amount added or subtracted from your position. This ensures that even if the new contract has a different price, your total position result remains the same.
đź’ˇ Example: Rollover in Oil Futures
You have a buy position of 100 units in Oil at an average price of $50.
At the time of the rollover:
- The current contract (expiring soon) has a buy price of $50.50 and a sell price of $50.45.
- The new contract (next month) has a buy price of $52.50 and a sell price of $52.45.
1. Calculate the price
Sell price difference = $52.45 - $50.45 = $2
Buy price difference = $52.50 - $50.50 = $2
2. Calculate the rollover adjustment
For a buy position, the adjustment formula is:
BUY position result adjustment = - (Quantity Ă— Sell price difference)
BUY position result adjustment = - (100 Ă— $2) = - $200
This means $200 will be deducted from your position’s result.
To confirm this adjustment is correct, let’s compare the profit before and after the rollover.
Before Rollover
Profit = Quantity Ă— (Current contract sell price - Average price)
Profit = 100 Ă— (50.45 - 50) = $45
After Rollover (without adjustment)
Profit = Quantity Ă— (New contract sell price - Average price)
Profit = 100 Ă— (52.45 - 50) = $245
The difference: $245 - $45 = $200
Since the adjustment applied was $200, it ensures that your profit/loss remains the same after the rollover.
How does auto-rollover work?
If you are using Aggregating mode with Auto Rollover, the expiring contract position will be automatically closed at the market price at expiration. A new position in the next contract will not open automatically, so if you want to maintain exposure in the future CFD, you will need to open a new position manually. If you already have an open position in the new contract, the rollover will not impact it.
Understanding how rollover adjustments work helps ensure you manage your positions effectively without unexpected profit or loss changes.