Brothers, today we’re going to thoroughly discuss the term 'rolling over'! Simply put, it’s three words: Close position → Switch position → Extend life! This operation is particularly common in the leveraged contract sphere, especially among those fierce players in futures and perpetual contracts. If you don't have some guts, you really wouldn't dare to touch it.

Let's first look at the 3 common scenarios of rolling over in the crypto world; newbies should pay close attention:

1️⃣ The contract is about to expire, and you don't want to settle.

In the crypto futures world, there are two types: perpetual contracts (with no expiration date, can be held indefinitely) and quarterly contracts (expire in 3 months). If you’re holding a quarterly contract, such as a June BTC contract, and you don’t want to close it as it approaches expiration, you can close it and switch to a September contract to continue 'holding the position'! But a word of caution: while you don't have to go through the hassle of rolling over perpetual contracts, you do have to pay a 'funding rate', which is essentially the cost of both sides harvesting each other, so don’t be careless!

2️⃣ Leverage is about to be liquidated, and you want to forcefully extend your life.

Let's say you are using 10x leverage to go long on BTC, but the price drops sharply and is about to hit the liquidation line, what do you do?

Here's an emergency operation for you: Close half of your positions, use the remaining margin to reopen positions, and reduce the leverage ratio. Just hold on for now! This tactic is commonly known as the 'death buffer tactic', but I must remind you, if not handled well, you may end up losing even more while rolling over, so use it cautiously!

3️⃣ The daily operations of arbitrageurs.

For example, simultaneously going short on BTC quarterly contracts on one exchange (because the price is high) and going long on perpetual contracts on another exchange (because the price is low), when the contract expires and you roll over, you can lock in the price difference profit. This operation is pretty slick, right?

But you also need to be aware of the hidden risks of rolling over positions, otherwise, you may easily fall flat:

❌ Funding Rate Backstab: When rolling over perpetual contracts to a new platform, you might get harvested by high funding rates! Just like a certain exchange, with a funding rate of 0.1%, rolling over once means the fees feel like they are given away for free!

❌ Needle Attacker: At the moment of rolling over, if you encounter extreme market conditions, both old and new positions might be liquidated, and you won't even have time to cry!

❌ Gas War: When rolling over contracts on-chain, such as ETH options, you might get your wallet drained by miner fees, and that would really hurt!

Let me give you a real case in the crypto world for you to feel:

Scenario: You go long on ETH with 100x leverage, with a capital of 10,000 USDT.

ETH price plummets by 10%, the margin is only 1,000 USDT left, just 1% away from liquidation.

At this moment, the rolling operation:

1️⃣ Close 90% of your position, leaving 100 USDT.

2️⃣ Use this 100 USDT to reopen a long position with 10x leverage.

So what’s the result? The position is reduced, but the leverage is also lowered, allowing you to withstand larger fluctuations while waiting for a rebound! However, if it continues to fall, this 100 USDT could still go to zero...

Finally, here’s a guide to avoid pitfalls while rolling over:

✅ Calculate price differences in advance: When switching quarterly contracts, you must compare the prices of the old and new contracts! Under a contango structure, long-dated contracts are more expensive, so rolling over in this case means you're paying out of pocket!

✅ Avoid high fee periods: Roll over perpetual contracts before the funding rate updates (usually every 8 hours) to save some money!

✅ Keep enough Gas money: When operating on-chain, reserve at least 50 USDT to deal with congestion, so you don't delay things because of insufficient miner fees!

To summarize, rolling over in the crypto world is like dancing on the edge of a knife: either you extend your life to make a comeback or accelerate your demise. I advise newbies to stay away from high leverage, and even veterans should definitely have a stop loss when rolling over; these are lessons learned from experience! If you have any questions, feel free to ask me!

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