Daily Roll, within crypto derivatives markets, signifies the routine operational procedure of closing an expiring futures or options contract and simultaneously opening a new contract with a later expiration date. This process is fundamental for maintaining continuous exposure to a specific cryptocurrency asset or derivative strategy without requiring physical settlement of the expiring position. It extends market participation across contract cycles.
Mechanism
The mechanism typically involves an automated or manually initiated sequence where an existing contract, approaching its settlement or funding period, is liquidated, and a replacement contract for the subsequent period is acquired. This transaction accounts for current market prices, available liquidity, and any basis differential between the expiring and the new contract. These operations are often scheduled for specific times, such as the close of a trading day or during funding rate resets.
Methodology
The strategic objective of a daily roll is to manage temporal decay in derivative positions and ensure uninterrupted market exposure for crypto traders. It permits sustained engagement with cryptocurrency price movements or options strategies while mitigating the administrative overhead and market impact of repeated new entries. This operational methodology aids institutional participants in navigating contract expiration cycles and managing funding costs within volatile digital asset markets.
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