Future Contract Rollover

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Rollover is when we switch from trading the contract that expires in the current month, to a contract that expires in a future month. Rollover for futures trading can occur each month, and/or quarterly.

With all of the different exchanges available to trade off these days (CME,NYMEX,EUREX), it is easy to get confused when trying to determine when contract rollover will actually occur.  In this article I will share with you the rollover dates for some of the most popular futures products that I trade ranging from all asset classes, as well as some of the common signs to look for that you might be trading in the wrong contract month.

For starters, some of my favorite index futures to trade are the e-mini’s, which trade on the Chicago Mercantile Exchange (www.cmegroup.com). The e-mini‘s that I trade are the S&P, Dow, Russell, and Nasdaq. All four of these indexes also expire at the same times throughout the year, which is quarterly:

The contract expiration months occur in March, June, September, and December.
The important part to remember for all of you e-mini traders out there is that the rollover day itself occurs 8 days before expiration on the second Thursday of each contract month.  You can trade up until the 3rd Friday of the contract month, but traders are usually in the process of trading the next contract month 8 days prior to that.

I also enjoy trading currency futures, like the Euro, Pound and Yen, which also trade on the CME.  These currency futures have contract rollover months of March, June, September and December. The last trading during each expiring contract month is at 9:16 a.m. Central Time (CT) on the second business day immediately preceding the third Wednesday of the contract month (usually Monday).

Some of my favorite commodity futures, which trade on the New York Mercantile Exchange (www.nymex.com), include Gold and Light Sweet Crude Oil.

The contract expiration occurs month to month.
When trading the Gold Futures, it is important to remember that rollover occurs each month, instead of every quarter like the e-mini contracts. So, if you trade Gold or are interested in trading Gold in the future, it is important to set yourself a reminder to check the next month’s contracts. This reminder can be set on anything from your cell phone to a desk calendar, as long as it is convenient for you.  When marking your calendar, you will want to remember that trading will terminate on the current contract month on the third to last business day of that current contract month.

The Crude Oil market is slightly different; they also rollover on a month to month basis, but on a different day during the month than Gold.  The last trading day available for the current contract month is going to be the third business day before the 25th of that month. If for some reason the 25th is not a business day, count back three days from the next business day preceding the 25th. For example if the 25th fell on a Sunday, you would count back three days from Monday, which means trading would cease on Wednesday for the current month’s contract. .

Other commodity futures such as Wheat, Corn and Soybeans (which also trade on the CME) also have different rollover days. If you are trading any of these commodities, you will want to rollover to the next contract month on the business day prior to the 15th of the current contract month.

These commodity futures have expiration months of: March, May, July, September and December.
Lastly, one of my favorite exchanges to trade off of is the Eurex (www.eurexchange.com), especially because they offer one of my favorite markets to trade, the Dax Futures. Not only do I enjoy trading the Dax, because of its large tick value, but I also find the DJ Eurostoxx 50 very interesting as well. The last trading day or settlement day for these Eurex products is going to be the third Friday of each maturity month, if this is an exchange day, otherwise immediately preceding that day. Trading will end on that last trading day once the start of the Xetra intraday auction begins at 13:00 CET (Central European Time).  For the DJ Eurostoxx 50, the last trading day is still on the third Friday of the contract maturity month, but the close of trading on the last trading day occurs at 12:00 CET.

The contract expiration months occur in March, June, September and December.
One last point I would like to make is, what is the easiest way to spot when a contract has switched to the next maturity month? Well what I find works best is to use some sort of market analyzer and compare the trading volume on the current contract month V.S the trading volume on the next maturing contract. A great example was during the month of July, we saw that Crude Oil was getting close to its contract rollover date for its August contracts. So, that week we kept a keen eye on the volume of the September contracts V.S the August contracts to make sure we would know when traders had started trading the September contracts. Sure enough, on July 20, 2009 we noticed that volume was actually higher on the September contract then it was in August! So just as a friendly reminder, always be paying attention to the volume traded during the contract month, especially during contract rollover week!!

Also, here are the links to all of the exchanges we talked about today, for more detailed information, please go to the following:

www.CMEGroup.com
www.Nymex.com
www.Eurexchange.com

maldini