Rolling Over Futures Positions
Futures positions in Indian Markets need be closed on the last Thursday of every month or the expiry month. In case of a holiday on the last Thursday the preceding day would be taken as the closing day. Current Month Futures being the most active we generally take positions in these. Now rolling over these positions need be done incase we need to carry the position for some more time. As there would be a difference in premium or discount for the current month to the next month futures we would need to be careful and a proper strategy need be employed. It would be ideal to shift positions 0-3 days in advance. Long Positions At Premium: In case say we are holding Satyam Current Month Futures and the price is 400.00 & Spot price is at 398.00 and next month futures is at 402.00. We need to to watch the intraday trend. Incase it is up we Buy the next month futures say at 402.00 and wait for the up move to generate 2.00 (Or the Difference between the Two) + the commissions payable. Say the commission’s payable on both closing current month futures & entering next months futures is 0.25+0.25 i.e 0.50. We look at closing the current month’s futures position at 402.50. In case the trend is down we shall sell the current month futures at 400.00 and wait for the down move to go down by 2.00 (Or the Difference between the Two) + the commissions payable. With the same example above we shall enter at 399.50 in the next month’s futures. At Discount: Incase say we are holding Satyam Current Month Futures and the price is 400.00 & Spot price is at 401.00 and next month futures is at 399.50. Say the commission’s payable on both closing current month futures & entering next months futures is 0.25+0.25 i.e. 0.50. We just close current month futures at 400.00 and enter next month futures at 399.50. Short Positions At Premium: Incase say we are holding Satyam Current Month Futures and the price is 400.00 & Spot price is at 399.00 and next month futures is at 400.50. Say the commission’s payable on both closing current month futures & entering next months futures is 0.25+0.25 i.e. 0.50. We just close current month futures at 400.00 and enter next month futures at 400.50. At Discount: Incase say we are holding Satyam Current Month Futures and the price is 400.00 & Spot price is at 402.00 and next month futures is at 398.00. We need to to watch the intraday trend. Incase it is up we close the current month futures say at 400.00 and wait for the up move to generate 2.00 (Or the Difference between the Two) + the commissions payable. Say the commission’s payable on both closing current month futures & entering next months futures is 0.25+0.25 i.e 0.50. We look at entering the nextt month’s futures position at 400.50. In case the trend is down we shall sell the next month futures at 398.00 and wait for the down move to go down by 2.00 (Or the Difference between the Two) + the commissions payable. With the same example above we shall close the current month futures at 397.50 in the current month’s futures. Further Ideas Enter next months position 1-2 days in advance. Close current month on 1 day before or on closing day. This is especially true when strong trends are in progress. Enter two or more positions in next month futures for intraday and close the surplus positions so as to get a better average price covering the difference in current & next month futures and the commission’s applicable. This was written based on Indian Markets where Futures Contracts expire every month. Good Luck & Happy Trading
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