Explainer
What is a futures contract rollover?
A rollover is the switch from an expiring futures contract to the next one; we use the front month by volume and switch at the 18:00 ET session open.
Updated
The short answer
A futures contract expires. When it does, trading moves to the next contract month. That move is the rollover, or roll. The index futures we list roll quarterly.
The new contract usually trades at a different price from the old one. That difference is not a market move. Nobody could have traded it.
- Roll
- The switch from an expiring contract to the next contract month.
- Front month
- The contract month treated as the market for a session. Ours is the one with the highest volume.
- Back-adjusted
- A price series in which old prices are shifted so the roll gaps disappear. We use it for display only.
- Raw price
- The price as it traded on its own contract. Our simulation runs on raw prices.
Why the price jumps
Continuous data chains the contract months together but leaves the jumps in the series. Run a backtest straight over that and a roll can trigger an entry, or take out a stop, on a price change that never happened.
The fix is not to smooth the jump away in the simulation. A back-adjusted line looks continuous on a chart, but it is made of prices that never traded.
A roll is not a price move. A backtest has to treat it as an event in the data, not as a tick on a chart.
How we handle it
These are the rules in our Assumptions, in plain words:
- The front month is chosen by volume, and the switch happens at the 18:00 ET session open.
- Prices are not back-adjusted. The simulation runs on raw prices.
- Roll dates are stored as explicit events in the data.
- No trade is ever held through a contract change. A position still open at the close of the last session before a roll is exited at that session’s final bar close, and nothing is reopened on the new contract.
- Gold uses the same method: the front contract is the one with the highest volume in the prior session, rolling forward only.
Micros, and ES and NQ together
The micros share their parent’s roll calendar. MES rolls with ES, and MNQ rolls with NQ. That makes two calendars for four symbols.
ES and NQ roll independently of each other. On a few sessions a year, 11 of 2,648 so far, they are on different contract months. That matters only to a run that trades both at once.
What a roll does to an open trade
Take a trade still open at the close of the last session before a roll. It does not carry across. It exits at that session’s final bar close. If the rules would have wanted a trade on the new contract, it starts again from the new contract’s own signals.
This rule keeps a gap from ever being counted as a win or a loss that nobody could have had.
The futures angle
In the Trade Lab replay, prices are raw and not back-adjusted, the front-month contract is shown, and the first bar of a new contract is marked on a roll. A paper position is closed at a contract roll and at the end of the data. Replay it on real NQ data, free, in the Trade Lab.
Questions and answers
How often do futures contracts roll?
The index futures we list, ES, MES, NQ and MNQ, roll quarterly. Each roll is stored in our data as an explicit event.
What is the front month?
The contract month treated as the market for a given session. Ours is the one with the highest volume, and we switch at the 18:00 ET session open.
Should a backtest use back-adjusted data?
Not for the simulation. Back-adjusted prices are not prices that traded. We run on raw prices and use a back-adjusted line only to draw charts.
What happens to an open trade at a roll?
In our runs it is exited at the final bar close of the last session before the roll, and nothing is reopened on the new contract.
Do micro contracts roll when the e-mini does?
Yes. MES rolls with ES and MNQ rolls with NQ, because they share the parent’s roll calendar.