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Futures Rollovers and Accounting for Profitability

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  • Grant, C.
  • Mann, J.

Abstract

Calculation of profit from futures trading that involves rollovers is important for investors, regulators, and researchers who track returns earned by individual or fund traders. An accurate profit calculation for trading activity involving rollovers cannot be achieved with a manufactured continuous data series formed by applying an automatic rollover rule. Rather, a two-step process is needed where spreads are fully accounted for in the profit calculation. We present a two-step procedure which accounts for spreads. We demonstrate the profit calculation with an example of a November soybean futures contract rolled over to a January soybeans future contract, and show how the resulting profit with the two-step method differs from the resulting profit determined using a manufactured continuous data series. Acknowledgement : None.

Suggested Citation

  • Grant, C. & Mann, J., 2018. "Futures Rollovers and Accounting for Profitability," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 276961, International Association of Agricultural Economists.
    • Handle: RePEc:ags:iaae18:276961
    DOI: 10.22004/ag.econ.276961
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    References listed on IDEAS

    as
    1. Óscar Carchano & Ángel Pardo, 2009. "Rolling over stock index futures contracts," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 29(7), pages 684-694, July.
    2. Christopher K. Ma & Jeffrey M. Mercer & Matthew A. Walker, 1992. "Rolling over futures contracts: A note," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 12(2), pages 203-217, April.
    3. Charles G. Geiss, 1995. "Distortion‐free futures price series," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 15(7), pages 805-831, October.
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    International Relations/Trade;

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