What is roll-over?
Roll-over typically refers to the process in futures contract trading of transferring an expiring contract position to the next delivery cycle's contract to avoid expiration or liquidation. In the cryptocurrency market, roll-over is common in perpetual contracts or periodic delivery contracts (such as weekly, monthly, or quarterly contracts). In simple terms, roll-over means 'extending' your position, continuing to hold without immediate settlement.
For example, if you hold a long position on a Bitcoin (BTC) quarterly contract that is about to expire, and you still expect BTC prices to rise and do not want to liquidate, you can 'roll' your position to the next quarter's contract to extend the trading cycle.
Roll-over operation process
Monitor contract expiration time
Most trading platforms (such as Binance, OKX, Bybit) will notify users of contract expiration through announcements or system reminders. Pay attention to the expiration time in advance to avoid forced liquidation due to negligence.
Choose new contract
Determine the roll-over target, usually the next delivery cycle contract (e.g., rolling from the September contract to the December contract). The price and market liquidity of the new contract may differ slightly, so careful comparison is needed.
Close old positions, open new positions
Before the old contract expires, close the current position (sell or buy to close) while establishing a position in the new contract in the same direction. This process requires quick action to minimize slippage losses due to price fluctuations.
Pay related fees
Roll-over involves closing and opening positions, which incurs trading fees. Additionally, perpetual contracts may involve funding fees, which need to be calculated in advance.
Confirm new position
After the roll-over is complete, check that the leverage, position size, and margin of the new position meet expectations to ensure account safety.
Pros and cons of roll-over
Advantages:
Extended holding period: No need to interrupt trading strategies due to contract expiration, suitable for investors with a long-term bullish or bearish outlook.
Flexibility: Allows traders to maintain positions when market trends remain unchanged, capturing larger volatility opportunities.
Avoid physical delivery: For speculators who do not wish to actually hold the asset, roll-over can circumvent the delivery process.
Disadvantages:
Cost accumulation: Roll-over involves multiple transactions, and fees and funding costs may increase expenses.
Market risk: During roll-over, the price difference between old and new contracts or market fluctuations may lead to unexpected losses.
Control leverage risk
Roll-over is usually associated with leveraged trading; high leverage amplifies returns but also magnifies risks. It is recommended that beginners use low leverage (e.g., 1-5 times) and set stop-loss lines to protect the principal.
Beware of market fluctuations
The cryptocurrency market is highly volatile, and during roll-over, slippage may occur due to price differences or liquidity issues. Try to operate when the market is stable and avoid rolling over during significant news releases (such as Fed interest rate hikes).
Small attempts, gradually becoming skilled
Application scenarios of roll-over
Trend traders: If you judge that BTC or ETH will continue to rise or fall, roll-over can help you maintain your position and capture long-term trends.
Arbitrage trading: Utilize the price difference between old and new contracts for arbitrage, suitable for advanced traders sensitive to market price differences.
Risk management: Adjust holding periods through roll-over to avoid short-term market fluctuations.
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