Rollover
Rollover involves transferring open trading positions from one business day to the next. This process is typically automated by brokers and trading platforms, which close open positions at day's end and open new identical positions for the next day.
Swap Calculation
As part of the rollover, a swap fee is calculated. This fee, which can be either a credit or a debit, is applied to an account based on overnight positions. Known also as an 'overnight financing fee,' the swap represents the cost of holding a position open overnight. While individual fees might be small, they can accumulate over time, affecting the overall account balance.
Swap Fee Examples
For instance, with EUR/USD at swap rates of 0.637/1.05, holding a long position of €10,000 would result in a charge of $1.05 for one night. Conversely, selling EUR/USD at the same amount would earn $0.64 overnight. These swap fees are adjusted to the account's base currency.
Settlement and Rollover Adjustments
In the spot forex market, trades are settled in two business days. If a trade is not closed before 5:00 PM New York time, it is automatically rolled over to the next settlement date. The rollover adjustment accounts for the daily cost-of-carry, ensuring the continuous maintenance of open positions.