Monday, 24 February 2014

What is the meaning of Rollover in NSE Share Market



Nse Traders can trade in index Futures on NSE or stock futures in Nse Stock Market
Futures and options represent two of the most common form of "Derivatives" in Nse Share Market . Derivatives are financial instruments that derive their value from an 'underlying'. The underlying is a stock issued by a company, The derivative instrument can be traded independently of the underlying asset. For Example Reliance Futures Derives its rates from Reliance stock.

The value of the derivative instrument changes according to the changes in the value of the underlying i.e value of that stock.
 
Rollover means carry forwarding a position in derivative (f&0) segment. The buy position  or sell Position that  you have taken in current near futures ( current f & o segment  ) will be squared off at the end of the current near futures  and you take the new fresh position in the same Stock Futures in mid month next f&o segment is called Roll over in Nse ( National stock Exchange )  Share Market.

Generally Roll over happens at end of the month (Near f&o segment expiry) and Rollover depend upon the Nse stock market trend if the Nse share market is bullish (tejI)  roll over mostly done in buying side and if the stock market trend is bearish ( Mandi) Rollover is done at selling side.

Rollover is possible only in Derivative segment (Future & Option Trading) of Nse share market also known as a F&O segment in NSE(National Stock Exchange).

Nse traders should understand that You can't roll over in Nse cash ( Equity cash )  segment. Rollover happens only and only in Nse Future & option Trading (f&o segment )

Nifty futures contracts have a maximum of 3-month trading cycle - the near month (one), the next month (two) and the far month (three). A new contract is introduced on the trading day following the expiry of the near month contract. The new contract will be introduced for three month duration. This way, at any point in time, there will be 3 contracts available for trading in the market i.e., one near month, one mid month and one far month duration respectively.

Future contracts For Three Month Duration.

1) Near month (current Future & option segment)
2) Mid month (Next month Future & option segment)
3) Far Month.

Period of  future & option Contract
Generally the end date of f&o (Future & option contract ) Segment  is last THURSDAY of the month and new future & option contract date  starts immediately on preceding Friday.
Ie.  New future & option contract starts on Friday immediately on expiry of the contract on Thursday.

Example  of  F&O  Segment contract Period
If the Near Month Future & options contract start  in the month of February 2014.
The  start date is  31st  January 2014  ( Friday ) & Contract will expire by 26th  February   2014  Wednesday .  Generally Future & Option contract expires on last Thursday of that month but if the last Thursday is a holiday, the contract will expire one day before i.e. Wednesday
Same way the Next month Future & option contract (Mid Month Future & option contract) will start by 28th February 2014  ( Friday ) and will expire by 27th March 2014  ( Thursday).  It’s called March f&o Segment 2014.

And the Far Month contract will  start by 28th March 2014 ( Friday ) expire by 24th april 2014 ( Thursday) Its known as  April  f&o  Segment  2014.

Nse Future Contract always expire’s on last Thursday of every month & it start new future immediately on Friday.

Roll Over Example

We advised you to read the example of Rollover which will give you complete idea and solved your all doubts on doing rollover in fno segment. (Current / Near month – Feb 14,  Mid / Next month  March 14, Far Month April 14.

Mr. Rakesh kumar an Intraday Traders holds positions in TCS (Stock Futures) having a lot size of 125 @ 2150 in Feb Segment i.e Current FNO Segment.  He is Bullish in the stock and wants to carry forward his positions to mid month or next month to make more profit.  He will roll over his positions to next month.  If the Price prevailing in the Next Month is Rs 2160/- Mr. Rakesh Kumar will have to pay premium of Rs 10 for doing Rollover in NSE Segment.
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Location: Mumbai, Maharashtra, India

12 comments:

  1. Venkat16 November 2016 at 23:34

    I dont see any example for how to do roll over

    ReplyDelete
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  2. Venkat16 November 2016 at 23:35

    I dont see any example for how to do roll over. If you know, how to carry over a option contracts to next month please let me know

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  8. Ravishankar15 May 2018 at 03:23

    As said there is no example of roll over which means the process of closing out all option positions in soon-to-expire futures contracts and opening new contracts in newly opened futures contracts in Nifty call

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