Oil Futures Rollover - URGENT

🤝 Help
1

Hello there.
I currently have 2000 barrels of oil in 21st April Contract.
They are currently trading at a buy price of $18.213
Oil in the 21st May contract are at a buy price of $25.073

Does this mean when the contract rolls over I will have 2000 x (25.073-18.213) = $13,720 deducted from my account?

Does is also affect the blocked funds in my account?

Thanks

Matt

2

@CirensOC A rollover is meant to be net neutral, adjustments are automatically made to make sure of that. So yes, there will be a correction of the size of your quantity x difference in price between the two contracts.

This previous post may be helpful:

3

Thanks David
And just to check, the price they were bought at ~$24 isn’t affected? The price you bought at doesn’t have an adjustment made?

Thanks

Matt

4

@CirensOC Yes, the opening price doesn’t matter. The prices crucial for the adjustment are:

  1. The price of your current contract at the moment of rollover.
  2. The price of the next contract at the moment of rollover.
5

Superb. Thanks David.

Stay safe.

Regards

Matt

6

Hello Matt and David,

I was trying to understand what you were trying to explain here and I have a hard time with this. I read the other article also, so I would like to understand better.

  1. If I bought Oil21April as Matt said for 22$, and the current price for April contract is 18.1, when rollover happens I will lose 3.9$ or my new position will be at 25+3.9=28.9, since May contract has a price of 25$? Because you haven’t explained that part, it sounded more complicated than it should be. So I think Matt will lose 13,720 on the rollover, I think he didn’t understand that in the end. Only other than this, but the unlikely scenario, is to have my 22$ position transferred to a new May contract.
  2. Rollover can happen only on contract expiration, it can’t be triggered earlier?
  3. If my account is at margin call situation, what will happen?

Best regards,
Marko Milanovic

7

Hi Marko
I was happy with the explanation when I looked at this in the end.

Basically if you go from a contract when you were had oil for $18 a barrel (buy) when the contract closed, and the new futures contract is $25 a barrel (buy) you will be deducted $7 for every barrel you own. So if you own 100 barrels you’ll be deducted $700 from your account, however, the barrels you own are worth $700 more so it equals out.

HOWEVER - what I have worked out is that is does change your margin position. The “blocked funds/margin” on the future at $18 are less than those on the future at $25. So if you were close to 25% margin called then the rollover could drop you below the 25% where positions are automatically sold. This is the danger with a rollover where the difference in prices between the 2 futures contracts are big. (ie oil currently ~$18 to $25). I think the rollover will take my position from 56% margin to 54% so it has an effect.

I’ve created myself a simple spreadsheet in excel so I can understand exactly what the effect of certain price changes, rollovers, future buys and sells will be so I can ensure I enough funds to cover certain scenarios ie oil dropping to $5 a barrel.

Hope this helps. I don’t work for 212 this is just what I’ve worked out.

Matt

1 Like
8

Hello Matt,

So you think it is better to go with the rollout then to close? Do you know what happens if I don’t have funds for that action? I mean my positions are in a big red now, about about 500$, but trouble is my account is 74% oil. I am at 47% margin now, but I am trying to understand is it better to close or to wait for a rollout. :slight_smile:

9

Hi Marko.
I really don’t think I can give advice. I’m not qualified at all in anything financial.
All I can say is try and get all the facts before making a decision. The buy price for the rollover oil future isn’t fixed, so it could rise or fall from its current level and this will have an effect on your margin.
Sorry I can’t be of more help but I really don’t think I should give advice here.

Regards

Matt

10

Hello Matt,

No problem, thank you for your effort to explain. I hope David can help more.

Best regards,
Marko

11

@Marko33 I wouldn’t say there’s much of a difference as to whether you close the position or keep it open for the rollover.

12

Hello David,

I am trying to figure out why there is this 7$ difference between two contracts and how charts are created, since you can see this 18$ value on this address but no 25$. https://www.cmegroup.com/trading/energy/crude-oil/light-sweet-crude.html

So if my open position is 22$ in oil21apr it will be the same on Oil20May contract? I will just have to pay for this 7$ difference?

Best regards,
Marko

13

Hello David,

Just to add to this, is it possible for price of oil21April to go up at this point and what is that related to since it seems is not related to oil20May price?

Best regards,
Marko

14

@Marko33 Futures are tricky, if you really wish to learn more about the fundamentals, I’d suggest this website: https://www.futuresfundamentals.org/

Even if the contracts’ prices are significantly different, you’re not in any way negatively affected. Due to the rollover adjustment, switching positions to next contract is essentially neutral.

1 Like
15

@David

  • What happen if the May Oil Contract Oil21Apr goes to zero 0$. Does the position get closed and rollover to June contract, or can value of the contract go to a negative value and rollover from bellow zero?
  • How to calculate short position rollover (for example if the current contract is 10$, and following contract 20$)?
16

Do you think the futures contract vortices are likely to converge? Or is this massive difference (currently $19) likely to stay?

17

I am afraid the difference is going to increase further.

18

So it would appear as it’s now down to nearly $2 a barrel. Not sure what to do now. Sell now and lose a lot or roll over. Though my suspicion is the slide isn’t gonna stop.

19

No choice now. Trading has been suspended!

20

Hey mate, how did you manage to keep the position open with this huge decline and 1:10 levarage??