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Rollover Example


Spook1304

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Can anyone explain in detail what happens when a future contract is rolled over on a spread bet account?

Example:

£50 per point on the VIX - Volatility Index.
Purchase Price was 20 for the Sep 21 expiry. 
Let's say (just as an example) the contract now expires tonight and the price is currently 18 (so the trade is currently sitting at a loss of £100).

I have a couple of questions:

  • What would happen to the existing contract?
  • What would the new contract look like?
  • What costs would be associated in rolling the contract over to the next month?
  • Is there any benefit to "rolling" the contract automatically (is it cheaper?) or is it the same as me closing my current position at a loss and reopening a new position with the Oct 21 expiry?

Thanks.

Edited by Spook1304
Asked another questions and corrected spelling.
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So from further reading it appears the following:
(If this doesnt look right - please feel free to correct me)

1. My existing contract would be closed off at the current price of 18. This would secure a loss of £100 on my account.

2. A new position would be opened for Oct 21 contract with a price of 18 (give or take a bit for spread).

My other questions still remain though:

  • Other than the loss of closing my losing position and the spread of opening a new position, is there any other costs associated with rolling over?
  • Would my new contract be opened with the same parameters? (EG, if I had a 2 point stop loss and a 2 point profit target, would these be implemented on the new contract?)
  • In terms of "Rolling Over" automatically through IG, does this provide any benefit compared to me just closing the existing trade and opening a new one in its place? (Is it cheaper somehow for IG to roll an existing contract than it is for me to open a new one?)

I'm currently testing this on demo but the next rollover isn't until 15 Sep so its slow going.

Any help is appreciated.

Edited by Spook1304
Minor updates.
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Hi @Spook1304

Thanks for the question

When a rollover is done on a VIX position the initial position is closed at the official closing level of the day, before the last dealing day of the contract, +/-closing spread. The new position in the next contract opens at the official closing level of the new contract, in the same day, +/- opening spread. 

1. There are no other costs other than closing and opening spread. You would realise any running profit/loss from the position in the prior contract

2. Yes, stops and limits would be carried over to the new position

3. We offer a concession on market spread when rolling over shares, but that would not be applicable in this case. So there is no benefit other than convenience. 

Hope this helps

Anda

 

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50 minutes ago, AndaIG said:

Hi @Spook1304

Thanks for the question

When a rollover is done on a VIX position the initial position is closed at the official closing level of the day, before the last dealing day of the contract, +/-closing spread. The new position in the next contract opens at the official closing level of the new contract, in the same day, +/- opening spread. 

1. There are no other costs other than closing and opening spread. You would realise any running profit/loss from the position in the prior contract

2. Yes, stops and limits would be carried over to the new position

3. We offer a concession on market spread when rolling over shares, but that would not be applicable in this case. So there is no benefit other than convenience. 

Hope this helps

Anda

 

Thanks for the reply - that's helped a lot.

 

  • Like 1
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