Stories
Beyond Expiry: Rollover Data Reveals True Market Trends, Says Shubham Agarwal
- •Open interest is crucial for understanding futures market participation, but monthly expiry complicates analysis.
- •Rollover data helps determine if a market trend will continue or lose strength after expiry by tracking positions shifted to next month's contracts.
- •A rollover involves selling the current month contract and buying the next month contract to maintain a market view.
- •Rollover percentage, calculated as open interest in later expiries divided by total open interest, indicates how much interest has moved forward.
- •Traders should compare a stock's rollover with the broader market, combine it with price and open interest analysis, and use it as a confirmation tool to manage risk.
Key Questions Answered
Rollover is the shifting of an open futures position from the current expiring month contract to the next expiry month contract. The rollover percentage can be calculated by dividing the open interest in all later expiries by the total open interest across expiries, and then multiplying by 100.
Traders can reduce risk by using options protection, such as buying a put option if holding long futures or buying a call option if holding short futures. They can also tighten their stop loss or sell a higher call or lower put to recover time value.
Eligible F&O stocks began using a Closing Auction Session, or CAS, to determine the closing price instead of the earlier VWAP-based method. Under this system, cash-market trading ends at 3:15 pm, the auction runs until 3:35 pm, and derivatives trading continues until 3:40 pm.
