|
file:///C:/MEDIA_~3/FK_NEW/include/content_vert_right.asp
|
Home > Forex > Roll Overs
Article By Rick Thachuk
World Link FuturesIn the spot FOREX market, trades must be settled in two business days. For
example, if a trader sells 100,000 Euros on Tuesday, then the trader must deliver 100,000
Euros on Thursday, unless the position is rolled over. As a service to customers, all open
FOREX positions at the end of the day (5:00 PM New York time) are automatically rolled
over to the next settlement date.
Roll over involves exchanging the expiring position for a
position expiring the following settlement date. The positions being exchanged are not
valued at the same price. If a trader is long the currency bearing the higher interest
rate, the position "being sold" is worth more than the position being acquired.
The reverse is also true; if a trader is short the currency bearing the higher interest
rate, then the trader is acquiring a position worth more than the one "being
sold". The amount of the difference varies based on the currency pair, the interest
rate differential between the two currencies, and fluctuates day to day. At 5:00 PM each
day, funds are subtracted from or added to accounts with open positions because of this
automatic roll over.
On Wednesdays, the amount added or subtracted to an account as a result of rolling over a
position is three times the usual amount. This "3-Day" rollover accounts for
settlement of trades through the weekend period. When there are bank holidays in either
settlement country the normal roll schedule does not apply.
The roll over adjustment in the FOREX market is simply the accounting of the cost-of-carry
on a day-to-day basis. In fact, in the demo account, you will see the roll charge or
premium stated under a section called 'cost of carry'.
To avoid a roll over, the trader can close all positions by 5:00 PM New York time.
Home
> Forex > Roll Overs
|
file:///C:/MEDIA_~3/FK_NEW/include/content_vert_right.asp
 |
Marketplace
Links |
 |
|
|
|
Futures Research
Quotes & Charts
