Rollover simply means the carrying forward of a contract position to the next expiry date. If a trader is not comfortable with a deal and thinks that he is not to incur a huge loss from a respective contract and doesn’t get the positive vibe to continue the contract, he can choose the option of rollover. When you think about futures market, the prices get quite strained and very uncertain at times. If the price movements are increasing rapidly one day, there are 100% chances that they will fall the very next day.
How Do Rollovers Work In India
A Futures contract is a contract that predicts the future price of the stock market. As you know the market is never stable most of the time the price movement might not move in a direction as it is expected. In such a situation, the traders who have invested in the stock market can make a ‘rollover process’ to avert the potential loss. According to layman’s language, rollover means bringing it forward. In Indian share market, a futures contract gets expired on the last Thursday of every month. Now, these expiring contracts get kicked off on the last day at the price that prevails in the market. If the trader does not feel safe in continuing his/her contract any further, he can choose to rollover. He/she can choose to carry forward the positions or choose to enter into a similar contract that expires on a future date.
How Does It Work
While most of the traders who invest in stock market go for the option of a rollover on the day of expiry, it is not compulsory though. Rollovers begin a week before the expiry date, and it can be done until the last minute of the stock market hours on the expiry day.
How Do You Evaluate Rollovers
The rollover percentage of a particular series in the entire stock market can be done by dividing the open interest of the latest series by the total amount of open interest of that particular series or the whole of the market. If you get a high rollover percentage, it is a good indication that suggests that quite a few incurring positions are being made in the next month contracts. If you get a lower percentage, it will locate at the weaker market sentiment. The traders wherein either chooses to close their current futures contract or let them expire, but do not initiate new futures contracts for the next month.
Clarify The Rollovers
The nifty future numbers are usually given as a percentage of rolled positions to total open positions. There are no such benchmarks for the rollovers buy they are compared by their past data, and he is dragging three-month average. The rollover is an indication that the reader is not willing to continue or carry forward the bets that he had put on the market. The figures at nifty future won’t let you know on which direction the traders have been betting.
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