Rolling Forward

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Roll Forward

What is Roll Forward

Roll forward refers to extending the expiration or maturity of an option, futures contract, or forward by closing the initial contract and opening a new longer-term contract for the same underlying asset at the then-current market price. A roll forward enables the trader to maintain the position beyond the initial expiration of the contract, since options and futures contracts have finite expiration dates. It is usually carried out shortly before expiration of the initial contract and requires that the gain or loss on the original contract be settled.

Basics of Roll Forward

A roll forward includes two steps. First, the initial contract is exited. Then, a new position with a later expiry is initiated. These two steps are usually executed simultaneously in order to reduce slippage or profit erosion due to a change in the price of the underlying asset.

The roll forward procedure varies for different financial instruments.

Key Takeaways

  • Roll forward refers to the extension of a derivatives contract by closing out a soon-to-expire contract and opening another one at the current market price for the same underlying asset with a future closing date.
  • Commonly-used derivatives in roll-forwards are options, futures contracts, and forwards.

Options

A roll forward can be done using the same strike price for the new contract as the old one, or a new strike can be set. If the new contract has a higher strike price than the initial contract, the strategy is called a “roll up,” but if the new contract has a lower strike price, it is called a “roll down.” These strategies may be used to protect profits or hedge against losses.

For example, consider a trader who has a call option expiring in June with a $10 strike price on Widget Company. The stock is trading at $12. As the call option nears expiration, if the trader remains bullish on Widget Company, she can choose to maintain her investment stance and protect profits by either selling the June call option, or by simultaneously buying a call option expiring in September with a strike price of $12. This “roll up” to a higher strike price will reduce the premium paid for the second option (compared to buying a new $10 strike call), thereby protecting part of the profits from the first trade.

Forwards

Forward foreign exchange contracts are usually rolled forward when the maturity date becomes the spot date. For example, if an investor has bought euros versus the U.S. dollar at 1.0500 for value on June 30, the contract would be rolled on June 28 by entering into a swap. If the spot rate in the market is 1.1050, the investor would sell the same number of euros at that rate and receive the profit in dollars on June 30.

The euros would net to zero with no movement of funds. The investor would simultaneously enter into a new forward contract to buy the same amount of euros for the new forward value date; the rate would be the same 1.1050 spot rate plus or minus the forward points to the new value date.

Futures

A futures position must be closed out either before the First Notice Day, in the case of physically delivered contracts, or before the Last Trading Day, in the case of cash-settled contracts. The contract is usually closed for cash, and the investor simultaneously enters into the same futures contract trade with a later expiry date.

For example, if a trader is long a crude oil future at $75 with a June expiry, they would close this trade before it expires and then enter into a new crude oil contract at the current market rate and that expires at a later date.

rolling forward

Rolling Forward

rolling forward

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Roll Forward a Project

This article is for:

Note: It is now a best practice to roll forward using Copy in Home. Learn More

You can roll forward a copy of a project and update it, rather than having to create it from scratch. If the project you are rolling forward does not include all linked documents, links in the subsequent project will not work correctly. When rolling forward, you can choose certain parts of the project to retain, such as comments.

If you are not an account admin and need to roll forward a project, contact your Customer Success Manager to learn how to export and import your project.

Copy a Project from Admin

If you are an account administrator, you can copy a project from the Admin panel. First, go to the Content tab and click the name of the project you’d like to copy.

From the project details page, click Copy Project to begin creating a copy of the project.

You will have several Project Copy options, including: Email on completion, Use original supporting documents, Copy comments and Copy outline labels. If you choose the first option, you will receive an email alerting you to when either a successful or failed project copy has been completed.

You will also be able to view the history and results of any project copy at any time on the Copy Status page of the Content tab.

Project Copy may take several minutes, though you may do other tasks in Wdesk while this process happens. You can check the status of a project copy at any time from the Copy Status sub-tab.

When complete, a duplicate of the project named “Copy of” followed by the copied project’s name will be available in your projects and documents list from Home.

NOTE: Any Tasks associated with a project will not carry over during a Project Copy.

TIP: You can set dates in one part of a document, then link the dates throughout the rest of the document. Utilizing linking, you can update dates once, and all linked dates will automatically update in all locations. To learn more, read the article Linking Overview.

Update Project Details

After your project has successfully been copied, you should update your project details for the new filing.

1 Click Project Properties icon in the Projects panel. 2 Update the Project name, verify period end and target filing date, and set Project permissions.

NOTE: Much of the information will auto-populate from Admin settings and can be changed at a later date if necessary.

3 In the right-hand Project panel, on the Documents tab, right-click a document name, choose Rename, and rename all documents (10-Q, Exhibits, etc.). 4 Set permissions for each document.

TIP: It is best practice to utilize the current reporting period end date in document names. For example,EX 03.31.2020 99.1 Press Release would roll-forward to EX 06.30.2020 99.1 Press Release when rolling from Q1 2020 to Q2 2020. This document name will be used as the filing document name as well.

Cleanup and Review

Once project details have been updated, you should review your document to ensure that all information is correct. You may encounter validation errors if all information is not updated.

1 Open the workbook and update the period end date. 2 Check the document to ensure all dates are linked and rolled forward. For example, if rolling from Q2 to Q3, verify six months has changed to nine months, second quarter has changed to third quarter,etc. 3 Check for updated dates on the signature page and exhibits. 4 Update hyperlinks as necessary. 5 Validate the document.

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