Rollover means shifting an open futures position from a contract that is near expiry to a later expiry month.
You exit the expiring contract and simultaneously enter the same position in the next month, so you can maintain market
exposure without letting the position go into expiry settlement or physical delivery.
How Rollover Works?
- Exit the current contract: Close your position in the near-month contract.
- Enter the next contract: Open an identical position in the next month or a far month contract for the same underlying.
- Net effect: Your market view continues, but your exposure now sits in the later expiry.
When Should You Roll Over?
- Do it before expiry: Roll over at least one trading day before the contract expires to avoid last-minute risks like low liquidity or wide spreads.
- Stock futures caution: If you hold stock futures to expiry, physical delivery rules may apply. Roll over well in advance if you do not intend delivery.
- Plan around volatility: Weekly and monthly expiries can see larger spreads and faster price moves. Choose a calm window during market hours.
What Does Rollover Cost?
Rollover is two trades, so expect costs on both legs.
- Price differential: The next month contract can trade at a premium or discount to the near month based on carry, rates, dividends, and demand.
- Brokerage and statutory charges: Fees and taxes apply to the exit and the entry.
- Slippage and impact: Fast markets or thin liquidity can widen spreads and increase effective cost.
Quick Cost Example
You sell the September contract at ₹500 and buy the October contract at ₹510.
Price differential cost is ₹10 per unit.
Total rollover cost is ₹10 × quantity plus brokerage plus taxes and other charges.
Avoiding Physical Settlement
- Index futures: Typically, cash settled at expiry.
- Stock futures: Subject to physical delivery at expiry. If you do not want delivery obligations, roll over before expiry or square off the position.
Example of a Rollover
You hold 1 contract of September futures in a stock. As expiry approaches, you sell September to close the position and buy October for the same quantity at the prevailing October price.
Your exposure shifts forward by one month, and you avoid settlement in the expiring contract.
Use protective stops while rolling, check spreads before placing orders, and confirm that the next month's price and lot size match the current contract.
What If…
| Scenario | Solution |
|---|
| Contract prices differ significantly | Use limit orders at your acceptable spread, and if liquidity is thin, roll in smaller tranches during better liquidity. |
| You forgot to rollover before expiry | Immediately square off the expiring leg, then re-enter the same position in the next month's contract if you still want exposure. |
| You roll on the expiry day | Execute early with firm limit orders and only in sizes that the visible order book can absorb to minimise slippage. |
| Rollover cost reduces expected returns | Cut position size or delay part of the roll until the spread normalises so your risk and expected edge stay intact. |
Last updated: 31 Oct 2025