What is Crude Oil Rollover?
Rollover is the process of keeping a position open beyond its expiry.
Oil is a futures contract which has an expiry date. If you would like to hold the position long term, you have to close the existing contract before expiration and open a position on the new contract. UBFX closes your existing position on expiration and opens a new position on the new contract automatically. This process is called the 'rollover’.
If you to carry a position beyond the expiry date, UBFX will automatically rollover the position for you -- i.e. your existing contract will be closed and a new position on the new contract will be opened automatically. You could close your position before expiry if you do not want your position to be rolled over.
Will I lose money during rollover?
During the oil rollover, you may see profit or loss in your account depending on the price difference of the closing month and opening month contract, and whether you're holding a Buy or Sell position. If the price of the opening month contract is trading at higher price, Buy positions will receive a profit and there will be a negative adjustment in your account. In contrast, Sell position will have a loss and there will be a positive adjustment in your account. The end result is that the net financial effect is zero.
Take note that you do have a pay for spread again during roll-over for entering the new month contract.
How does UBFX calculate rollover adjustment?
Rollover adjustment if buying = (CLOSING PRICE – OPENING PRICE) * Lot * 1000
Rollover adjustment if selling = (OPENING PRICE - CLOSING PRICE) * Lot * 1000
Note: CLOSING PRICE refers to the closing price of the closing month contract before the rollover date. OPENING PRICE refers to the opening price of the opening month contract on the rollover date. 1 Lot equals to 1,000 barrels of crude oil.
Example: Long position of 0.1 lot of USOIL
Closing month Contract before rollover date closes @ 53.315
Opening month Contract on rollover date opens @ 53.426
Rollover adjustment will be (53.315-53.426)*0.1*1000 = -$11.1
A negative sign indicates there will be a negative adjustment in your trading account.