I. Definition and Core Purpose of Rolling

Rolling is a trading strategy in futures, referring to closing near-month contracts before expiration and simultaneously opening far-month contracts of the same variety to continue existing positions. Its core purposes include:

  1. Avoid Physical Delivery: If investors do not roll over before futures contracts expire, they may face physical delivery or cash settlement, while rolling can maintain market exposure.

  2. Maintain Market Participation: Through rolling, investors can continuously participate in market fluctuations and capture trend profits.

  3. Manage Risks: Avoid liquidity risks and price volatility risks brought by near-month contracts' expiration.

  4. Capture Spread Opportunities: Utilize price differences between contracts of different months for arbitrage.

II. Rolling Operation Methods and Steps

1. Basic Operational Process

  • Close Old Contracts: Before the expiration of near-month contracts (usually 1-2 months before the delivery month), close the currently held contracts.

  • Open New Contracts: Simultaneously open the same number and direction of far-month contracts (e.g., from September 2025 contracts to December 2025 contracts).

  • Timing Selection:

    • Trend Market: In a unidirectional upward or downward trend, rolling can continue positions and expand profits.

    • Minimize Price Difference: Operate when the price difference between old and new contracts is small to lower costs.

2. Common Strategy Types

  • Trend Following Strategy:

    • Bull Market (Zhang Sheng Rolling): Close near-month long positions, open far-month long positions, and continue bullish positions.

    • Bear Market (Zhang Die Rolling): Close near-month short positions, open far-month short positions, and continue bearish positions.

  • Spread Trading Strategy:

    • Arbitrage based on the price difference between contracts of different months (e.g., near-month contracts trading at a discount to far-month contracts), locking in spread profits through rolling.

  • Roll-over Strategy:

    • Select far-month contracts with good liquidity and stable basis based on market supply and demand changes for roll-over.

3. Key Tools and Technical Analysis

  • Technical Indicators:

    • Moving Averages: Determine market trend direction (e.g., 20-day, 60-day moving averages).

    • MACD: Confirm trend strength and turning points.

    • Bollinger Bands: Assess price volatility range and assist in setting stop losses.

  • Fundamental Analysis:

    • Pay attention to supply and demand data (e.g., inventory changes, production reports), macroeconomic policies, and geopolitical events.

III. Key Points of Risk Management

1. Major Risk Types

  • Basis Risk: The widening price difference between old and new contracts may increase rolling costs.

  • Liquidity Risk: Low trading volume in far-month contracts may lead to slippage or inability to execute trades in time.

  • Margin Risk: Increased position size requires additional margin, which may trigger forced liquidation.

  • Market Reversal Risk: A sudden reversal in trend may lead to accumulated losses.

2. Risk Control Measures

  • Capital Management:

    • Initial Position: Control initial capital to 20%-30% of total capital.

    • Decreasing Additions: Reduce the amount of capital added during subsequent rollovers (e.g., 30% → 20% → 10%) to avoid excessive leverage.

  • Stop Loss and Take Profit:

    • Dynamic Stop Loss: Adjust stop loss positions after each rollover, referencing technical support/resistance levels or fixed percentages (e.g., 2%).

    • Take Profit Target: Set clear targets (e.g., partial withdrawal after capital doubles) to avoid greed leading to drawdowns.

  • Liquidity Screening:

    • Choose far-month contracts with active trading volume and large open interest to reduce transaction costs.

3. Case Analysis

  • Successful Cases:

    • BNB Futures Rolling: Investors rolled from $200,000 to $150 million through rolling strategies but faced liquidation during a market crash due to not stopping losses in time.

    • Crude Oil Futures Rolling: During the upward trend in crude oil in 2025, investors extended long positions through continuous rolling, making over 300% profit.

  • Failure Cases:

    • Coking Coal Rolling Mistake: Investors forcibly rolled over when the price difference was too large, leading to a surge in costs and ultimately resulting in losses.

IV. Applicable Scenarios and Limitations of Rolling Strategies

1. Applicable Scenarios

  • Unilateral Trend Market: When the market is clearly in a bull or bear trend, rolling can maximize profits.

  • Stable Spread Varieties: Such as crude oil, gold, etc., which have good liquidity and small basis fluctuations.

  • Long-term Holding Demand: Continuous exposure to the market is required to avoid interruptions in delivery.

2. Limitations and Precautions

  • Market Volatility: Higher rolling risks exist for highly volatile products (e.g., cryptocurrencies), requiring stricter risk controls.

  • Contract Rule Differences: Delivery rules and margin requirements may differ across exchanges and affect strategy execution.

  • Psychological Factors: Overcome greed and fear, and strictly execute trading plans.

V. Summary and Recommendations

Rolling strategies are important tools for continuing positions and managing risks in futures trading but must be combined with the following principles:

  1. Accurate Market Judgment: Confirm trend direction through technical and fundamental analysis.

  2. Strict Capital Management: Control position ratios to avoid excessive leverage.

  3. Dynamic Risk Control: Set stop losses and take profits, regularly assess basis and liquidity.

  4. Continuous Learning: Stay updated on market dynamics and optimize strategy parameters (e.g., timing for rolling, contract selection).

Final Recommendation: Beginners should start with simulated trading, gradually practice rolling strategies, and maintain discipline in real trading to avoid significant losses due to emotional trading.

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