What is a CFD Rollover?
When traders hold CFD positions, whether long (buy) or short (sell), the brokerage has in place predetermined dates that the contracts are closed. Traders may, on these dates, close out their positions, buying or selling, as the case may be, and either pocket their earnings or incur their losses, depending on the price movement of their CFD. In the event that a trader does not specifically close his position, the brokerage will automatically rollover the position to the next trading period, charging or crediting the trader with the difference between the closing price on the old contract and the opening bid on the new one.
A rollover example:
A trader has an open SHORT or SELL position of 1,000 Crude Oil Barrels.
The current contract closing quote is 45.50 (Bid)/45.54 (Ask), and the new contract quote is 46.50 (Bid)/46.54 (Ask).
The difference is +1 USD, i.e., the new contract is HIGHER than the old contract.
To rollover the open short position, Fortrade automatically closes the old contract at the ask price of (since the client has a SELL position, it will be closed in the ask price, which is 45.54), and simultaneously re-opens at the new contract bid price of 46.50.
In this example, the client is credited with the sum of 960 USD, reflecting the price difference between the two contracts. It means that the customer’s charge is equivalent to the spread of the Bid and the Ask (i.e., the new contract will be opened at the Bid price, which is 46.5).
The calculation is: (46.5 – 45.54) * 1,000 = 960 USD
(Old Contract Closing Ask Price – New Contract Opening Bid) * Amount = Rollover Charge/Credit)