Futures Traders Need To Watch Rollover Dates
Futures contracts are written for a specific, finite time period which means they must be rolled over on a regular basis to remain viable. Some contracts, such as crude oil, expire and need to be rolled monthly. Others, such as cotton or gold, expire and can be rolled only on certain specific months of the year. Expiration dates are specified in the contract and will vary with the asset being traded. Before you buy a contract, you should know what the expiration date is and what your rollover options are. Rollover dates are standardized for contracts of different asset classes and are set by each exchange. It’s important to know and track the specific expiration dates and requirements of futures contracts you purchase so that you don’t miss those all important rollover dates.
For most futures contracts traded on the Chicago Mercantile Exchange (CME) and Chicago Board of Trade (CBOT), the following expiration and rollover practices apply:
- Contracts expire on the third Friday of each quarter: March, June, September and December. Contract expiration months are represented by the following letter assignments: March=H, June=M, September=U and December=Z
- Rollover is 8 days before expiration. For example, this month, December 2007, the rollover date is Thursday, December 13.
- Rollover is always on a Thursday. Generally, rollover will be on the second Thursday of the month; however, if the first day of the month begins on a Friday, rollover will be on the first Thursday of the month.
- Trading volume shifts to the new contract at market open on rollover day (9:30 a.m. EST).
- New day trading or swing trading positions opened on rollover day should utilize the new contract expiration month irrespective of when you plan to close your position.
- If opened within a few days of rollover day, new swing positions should be opened using the new contract.
Market myths and rumors abound as expiration and rollover dates come due. Savvy futures traders will always check the source, study their market indicators and confirm the probabilities of the rumor before acting.
For more information, 11 free trading lessons and a free ebook, visit Futures Trading Secrets.
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June 27th, 2008 at 6:01 am
I tend to roll contracts the month before the expiration, mainly because I’ve seen price action get even more unpredicatble as contracts near expiry dates. There is always a trade off though, roll too early and you enter a contract with very little trading volume. Is there an ‘ideal’ time to roll?
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