Skip to main content

What Is the Concept of “Rolling the Hedge” and How Does It Relate to Basis Risk?

Rolling the hedge involves closing an expiring derivatives contract and simultaneously opening a new, longer-dated contract to maintain the hedge. This process exposes the trader to "roll risk," which is a form of basis risk related to the cost or gain realized when closing the old contract and opening the new one.

What Does ‘Rolling Over’ a Traditional Futures Contract Mean?
How Does Backwardation Affect the Profitability of a ‘Roll Yield’ Strategy?
What Is “Roll Over” and How Does It Apply to Traditional Futures?
What Is the Risk of “Contango” When Rolling a Position?