As discussed earlier, rollover refers to carrying forward a particular month’s derivative position to the next month. Rollover data allows to understand how much of current month’s open interest positions in futures, are being carried forward to the next month series.
Rollover percentage is calculated as open interest for the next month divided by the open interest of the futures contract across all periods. For example suppose open interest position of Ashok Leyland futures are as below:
Near month Mid month Far month
5,50,83,000 34,30,000 28,000
A high rollover percentage indicates that a lots of positions are being carried forward to the next month and traders are still holding onto their belief about the direction of stock’s movement. On the contrary, a low rollover percentage indicates lack of confidence about the future direction of the underlying stock or commodity.
Rollover percentage = 34,30,000 / (5,50,83,000 + 34,30,000 + 28,000) = 5.9%