Futures Rollovers and Accounting for Profitability

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.


Issue Date:
2018-07
Publication Type:
Conference Paper/ Presentation
DOI and Other Identifiers:
Record Identifier:
https://ageconsearch.umn.edu/record/276961
Language:
English
JEL Codes:
G13; G11




 Record created 2018-10-02, last modified 2020-10-28

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