What is Roll-Cost?

General
1

What is Roll-Cost? How is it calculated for Nifty/Stock futures? Can you please give one precise example? I could not find relevant information on the net.

Thanks & Regards,

2

Rolling over of nifty futures means closing the present expiry dated position and entering in to next month or far month nifty contracts.

To roll over one has to close existing contract and enter in to next month contract, in order to do so some charges are involved and are called as transaction costs(turnover charges,stt,stamp duty,brokerage etc).

Also at the time of expiry future will converge to spot price and next month contract may trade at either discount or at premium.

For example if one want to take a long position and if new contract is trading at a premium to spot then one has to pay more price(premium) to roll over and this premium paid is also a part of roll over costs along with transaction costs.

Generally premium costs will be major chunk of roll over costs.

3

Thanks Siva. Roll-Cost is expressed in % terms. Can you please give a brief example of how the roll cost is worked out exactly?