A trade held on to the following day:rolled over, with interest either way.
The process of extending the settlement date of an open position to the next trading day.
Rollover involves paying or receiving swap interest based on the interest rate differential of the currency pair.
In plain words
Currency trades at today’s price are due to settle a couple of business days after they are made. A trader who wants to keep a position open, and not exchange the currencies, has the settlement date pushed forward by one day at the end of each trading day. That daily push is the rollover.
See it move
Daily cut-off, then Date moved on
Why it matters
Each rollover comes with an interest adjustment called swap, which can be a charge or a credit. On one day of the week, commonly Wednesday for many currency pairs, the adjustment is applied three times to cover the weekend.
Worked example
An example only. The figures are round and invented for the arithmetic: they are not market prices.
A trader opens a position on Monday and closes it on Friday before the daily cut-off; the swap is a charge of 5 US dollars a night, tripled on Wednesday.
- 1Rollovers passedMonday, Tuesday, Wednesday and Thursday.
- 2Wednesday counts three times, so the nights charged are 1 + 1 + 3 + 1 = 6.
- 3Total swap6 × 5 US dollars = 30 US dollars.
The position passes four rollovers and is charged six nights of swap, 30 US dollars in all.
A common mistake
Rollover applies at a fixed cut-off time, not after 24 hours of holding. A position opened minutes before the cut-off is rolled, while one opened just after it and closed before the next is not.
Check yourself
Educational information, not investment advice or a recommendation to trade.