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3-day rollover strategy
Following current interest rates
Keeping Your Positions Open Overnight
Rollover interest may be applied to positions that are left open overnight. When it comes to forex instruments, the amount credited or charged is determined by the difference in exchange rates between the two currencies that are being traded as well as the position (long or short). The amount credited or charged in the case of stocks and stock indices is determined by whether a short or long position has been taken.
Please be aware that only cash instruments are eligible for rollover interest. There are no overnight fees for futures instruments, which have an expiration date.
About Rollover
Extending the settlement date of an open position—that is, the deadline for settling a completed trade—is known as rollover. The forex market stipulates that all spot trades must be settled within two business days, implying the actual delivery of currencies.
Since there is no physical delivery while trading on leverage, all open positions must be closed at the end of the day (22:00 GMT) and reopened the next trading day. As a result, the settlement is delayed by one trading day. We refer to this tactic as rollover.
A swap contract is used to agree on rollover, which has an impact on traders’ profits or losses. Depending on the prevailing interest rates, ZenithFX just debits or credits trading accounts for positions held open overnight rather than closing and reopening them.
Rollover Policy
Calculating Rollover
For Forex and Spot Metals (Gold and Silver)
Rollover rates for positions on forex instruments and spot metals are charged the tomorrow-next day (i.e. tomorrow, and the next day) rate, including the XM mark-up for holding positions overnight. Tom-next rates are not determined by XM but are derived from the interest rate differential between the two currencies that a position was taken in.
Example:
Assuming that you trade in USDJPY and that the tom-next rates are as follows:+0.5% for a long position
-1.5% for a short position
In this scenario, the interest rates in the USA are higher than in Japan. A long position in the currency pair held open overnight would receive +0.5% – the XM mark-up.
Conversely, for a short position the calculation is -1.5% – the XM mark-up.
More generally, the calculation is as follows:
Here the +/- depends on rate differentials between the two currencies in a given pair.
*The amount is translated to currency points of the quote currency.
For Stocks and Stock Indices
Rollover rates for positions on stock and stock indices are determined by the underlying interbank rate of the stock or index (for example, for an Australian-listed security, that would be the interest rate charged between Australian banks for short-term loans), plus/minus the XM mark-up on long and short positions respectively.
Example:
Assuming that you trade in Unilever (a UK-listed stock) and that the short-term interbank rate in the UK is 1.5% p.a., for a long position held open overnight, the calculation is as follows:-1.5%/365 – the XM daily mark-up
Conversely, the calculation for a short position is +1.5%/365 – the XM daily mark-up.
More generally, the calculation is as follows (with daily rates as seen below):
Here the +/- depends on whether one has taken a short or a long position on an instrument.
Booking Rollover
Volatile or Illiquid Market Trading
ZenithFX strives to give you with the finest service possible, especially in volatile market situations, by executing orders at the best available market price. This is made possible by its awareness and business ties with many liquidity providers.