What are future rolls

What are Future rolls?

A future roll, also known as a future spread, is the combination of a long position in one futures contract and a short position in another (same underlying).

Future spreads are traded to roll forward a future position before expiration or to bet on the price difference between two futures.

 

Thalex offers dedicated spread order books for each possible pair of a perpetual – future and future – future. This provides several advantages:

  • Execution-efficient: Creating a roll position by trading the outright contracts in sequence is inefficient. Once the first leg is filled, the second leg needs to be closed quickly to hedge delta risk. A future roll is executed in a single order, which eliminates leg risk. Furthermore, the spread of the future roll book should be narrower than the spread of outright futures (except the perpetual).
  • Margin-efficient: Since future rolls result in delta-neutral positions, portfolio margin is directly applicable when traded as a combination. The margin requirement is 4% x Index (roll contingency). If trading the outright contracts, position sizing would be constrained by delta exposure mid-execution.
  • Fee-efficient: Execution of a roll order, results in two outright future positions, but trading fees are only charged once. This effectively provides a 50% fee discount compared to the same position being created by trading outright contracts.
  • Preserve edge: Future roll limit orders imply liquidity into the outright order books. When such implied order is traded, this creates a fill for future roll limit order. This means that execution of roll orders does not rely on finding another counterparty in the roll itself. This feature, called implied matching, is well-established in traditional markets, but Thalex is the first to implement it within crypto.

 

Please see our Contract Specifications for more information.