roll forward refers to extending the expiration or maturity of an option futures contract or forward by closing the initial contract and opening a new longer term contract for the same underlying asset at the then current market price a roll forward enables the trader to maintain the position beyond the initial expiration of the contract since options and futures contracts have finite expiration dates it is usually carried out shortly before the expiration of the initial contract and requires that the gain or loss on the original contract be settled 
basics of roll forwarda roll forward includes two steps first the initial contract is exited then a new position with a later expiry is initiated these two steps are usually executed simultaneously in order to reduce slippage or profit erosion due to a change in the price of the underlying asset the roll forward procedure or switch varies for different financial instruments optionsa roll forward can be done using the same strike price for the new contract as the old one or a new strike can be set if the new contract has a higher strike price than the initial contract the strategy is called a roll up but if the new contract has a lower strike price it is called a roll down these strategies may be used to protect profits or hedge against losses for example consider a trader who has a call option expiring in june with a 10 strike price on widget company the stock is trading at 12 as the call option nears expiration if the trader remains bullish on widget company they can choose to maintain their investment stance and protect profits by either selling the june call option or by simultaneously buying a call option expiring in september with a strike price of 12 this roll up to a higher strike price will reduce the premium paid for the second option compared to buying a new 10 strike call thereby protecting part of the profits from the first trade forwardsforward foreign exchange contracts are usually rolled forward when the maturity date becomes the spot date for example if an investor has bought euros versus the u s dollar at 1 0500 for value on june 30 the contract would be rolled on june 28 by entering into a swap if the spot rate in the market is 1 1050 the investor would sell the same number of euros at that rate and receive the profit in dollars on june 30 the euros would net to zero with no movement of funds the investor would simultaneously enter into a new forward contract to buy the same amount of euros for the new forward value date the rate would be the same 1 1050 spot rate plus or minus the forward points to the new value date futuresa futures position must be closed out either before the first notice day in the case of physically delivered contracts or before the last trading day in the case of cash settled contracts the contract is usually closed for cash and the investor simultaneously enters into the same futures contract trade with a later expiry date for example if a trader is long a crude oil future at 110 with a june expiry they would close this trade before it expires and then enter into a new crude oil contract at the current market rate that expires at a later date investopedia does not provide tax investment or financial services and advice the information is presented without consideration of the investment objectives risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors investing involves risk including the possible loss of principal 