Rolling Futures Explained

Exchange Futures Contracts

Exchange Futures contracts EXPIRE because they are related to a definitive date and there are many months traded simultaneously.

Rolling Futures Explained

The Brent Crude Oil Futures Contract

(The forward prices can be higher or lower depending on market conditions).

Month	Year	Expiry Date	Price
August	2011	14/07/11	$116.34
September	2011	16/08/11	$115.81
October	2011	15/09/11	$115.41
November	2011	14/10/11	$115.13
December	2011	15/11/11	$114.88
January	2011	15/12/11	$114.69
February	2011	16/01/12	$114.47
March	2011	14/02/12	$114.26
April	2011	15/03/12	$114.02
May	2011	13/04/12	$113.79

LCG rolls the Brent, WTI, Gasoil and Nikkei contracts on the second Wednesday of each month (Nikkei will roll the second Wednesday of every third month). We roll all three energy contracts at the same time because some traders will trade one contract against another. E.g. Brent v Gasoil, the 'Crack' or Brent v WTI, the 'Arb'.

Please note that on these days the Gasoil contract will close at 16:30 London time and the Brent $ WTI contracts will close at 19:30 London time.

Using the example above, when Brent for August expires, the September price becomes our new contract price and thus will decrease by $0.53. This is obviously not a price fall in oil but just a move to a new reference price and therefore no profit or loss will be incurred as a result.

In order to make sure this does not cost, a cash adjustment needs to be made and will show on the 'Swap' column on you 'Trade' and 'Account History' tabs.

Please find two examples below:

Rollover Examples

Example 1

Long position of 1000 barrels @ $116.34

Cash adjustment of + $530 is made on account

Equity on open position position decreases by $530

Net financial effect is zero.

Example 2

Short position of 2000 barrels @ $116.34

Cash adjustment of -$1,060 is made on account

Equity on open position increases by $1,060

Net financial effect is zero.