What is rolling positions? A must-read for contract traders! Even beginners can understand it in seconds!
A must-read in the crypto world | What the heck is 'rolling positions'? A self-rescue guide for contract traders!
What is rolling positions in the crypto world?
One sentence summary: Close position → Switch position → Extend life!
In the crypto world, rolling positions are commonly seen among *leveraged contract traders*, especially those who play with futures/perpetual contracts.
The 3 main scenarios of rolling positions in the crypto world
1️⃣ Contract expiration without wanting to settle
There are two types of futures in the crypto world: *perpetual contracts* (no expiration date) and *quarterly contracts* (expire in 3 months).
If you hold a quarterly contract (like the June BTC contract), close your position before expiration and switch to the September contract to continue “holding the position”!
Note: Although perpetual contracts do not require rolling positions, you still have to pay the “funding rate” (mutual liquidation of longs and shorts)!
2️⃣ **Leverage about to get liquidated, forcefully extending life
Using 10x leverage to long BTC, and the price crashes to the liquidation line?
Emergency operation: Close half of your position → Use the remaining margin to open a new position → Reduce the leverage multiplier, hang on!
(Commonly known as the “death pause tactic”, but it may lead to greater losses as you roll…)
3️⃣ Daily operations of arbitrage traders
For example, shorting a BTC quarterly contract (high price) while longing another perpetual contract (low price) to roll positions at expiration and lock in the price difference profit~
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Hidden risks of rolling positions in the crypto world**
❌ Funding rate betrayal: Rolling perpetual contracts to a new platform may result in high funding rates being harvested!
(Example: Certain platform’s funding rate is 0.1%, rolling once = giving away transaction fees)
❌ Spike assassin: Encountering extreme market conditions during the rolling process may lead to liquidation of both new and old positions!
❌ Gas wars: On-chain contract rolling (like ETH options) may be drained by miner fees!
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A real example from the crypto world
Scenario: You use 100x leverage to long ETH, with a capital of 10,000 USDT
▫️ ETH price drops by 10%, and your margin is only 1,000 USDT, just 1% away from liquidation!
Rolling operation:
1️⃣ Close 90% of the position (leave 100 USDT)
2️⃣ Use 100 USDT to open a new 10x leveraged long position
▫️ Result: Position size is reduced but leverage is lowered, can withstand fluctuations → Wait for a rebound!
(But if it continues to drop, 100 USDT will still go to zero…)
