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Rolling Hedge

What does Rolling Hedge mean?

Rolling Hedge is a risk reducing strategy that involves closing out nearby or next nearby exchange-traded futures and options contracts; and then repurchasing to push out the maturity date.

Futures Knowledge Explains Rolling Hedge

In rolling hedge, though the underlying contract is expiring, the trader still wants to keep the hedge in place. So the existing position is sold in the contact that will mature soon and an equivalent position is bought in a contract for the future month. Thus, the hedge is carried over for successive periods, and for extended time periods. This strategy is typically used with options that are bought to reduce the risk of wide swings in the price of a security.

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