Concept
Rollover and Cost of Carry
Rolling means closing a position in an expiring contract and opening the equivalent in a later one. It is two transactions, not a continuation. Cost of carry describes why a future trades at a different price from its underlying.
How to read it
- A roll incurs the costs of both an exit and an entry, including spreads and statutory charges on each.
- Rollover percentage, reported around expiry, describes what share of outstanding positions moved to the next series rather than being closed.
- The gap between a future and its spot price — the basis — reflects financing and time to expiry, and converges toward zero as expiry approaches.
What it does not tell you
- Rollover data is aggregate and does not identify direction. A high rollover figure indicates positions were carried forward, not that they were long.
- The new contract is a different instrument with its own liquidity and its own price. Treating a roll as a continuing position obscures that a fresh entry decision was made.
- Basis widens and narrows with financing conditions and demand, so it is not a fixed relationship.
Frequently asked questions
What does rollover mean in F&O?
Closing a position in the expiring contract and opening the equivalent position in a later expiry. It is two separate transactions with their own costs.
What is a good rollover percentage?
The figure describes how much open interest moved to the next series. It is widely reported as a sentiment measure, though it carries no directional information since every position has two sides.
What is cost of carry?
The financing and time component explaining why a futures price differs from spot. It converges toward zero as expiry approaches.
Why is the futures price different from spot?
Because holding a position to a future date involves financing over that period. The difference narrows as the remaining time shortens.
Related
- Expiry Day Mechanics — Concept
- Open Interest — Concept
- Margin: SPAN, Exposure and What You Actually Post — Concept
Educational use only
This page is educational material about how a technical tool is calculated and read. It is not investment advice, not a recommendation to buy or sell anything, and not a signal service. No indicator predicts future prices. CernoQuant is a trading journal and analytics platform, not a SEBI-registered investment adviser. Trading decisions and their outcomes are yours alone.
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