The following section is of a more complicated nature and it is addressed basically to investors intending to operate with commodities and stock exchange indices on the MetaTrader 4 platform provided by Silver Stone FX.
In the case of Contracts for Difference based upon the futures contracts traded on stock exchanges, in most cases once per month the necessity for a rollover procedure occurs. This results from the fact that the CFD instruments are typically based on the most liquid futures contracts series. As each of the series of stock exchange futures expires, there is a necessity to change the underlying futures series for the CFD instrument.
What is most important about the rollover procedure is that it is neutral for the investor, i.e. it does not influence the financial result from the open position on a given market, if there are any. The positive (or negative) change of the nominal price of the CFD contract, caused by a change of underlying futures series, is offset by negative (or positive respectively) adjustment of the swap points. It will be clearer if we consider an example of how it works in practice:
Example
Let us assume that the trader has an open position on the corn market. As the underlying instrument for that CFD is a futures contract traded on the Chicago Board of Trade stock exchange, we are looking at the corn futures, expiring in next three months. Currently the prices are:
As a result of a rollover, the price of the corn instrument will change from 432,40 to 447,60 (USD), i.e. will rise by 15,20 USD. Any open positions will be adjusted by the swap points, in order that the price change caused by the rollover does not influence the financial result from the transaction.
In both cases, the result of the open position does not change, as the operation is of purely a technical nature.