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Every futures contract has a limited term because the delivery date is fixed. In order to invest in commodities over the long term and avoid having to take physical delivery, futures need to be sold before they expire. An investor wishing to remain invested in the same commodity must buy a new future with a longer term at the same time as selling the old one. Thus, at regular intervals – usually monthly – a contract which is about to expire is closed out (sold), and a contract with the next-shortest term is opened (bought). This is known as rolling over.

In a rollover, the investment amount in the futures contract which is about to expire (the “nearby contract”) is generally “rolled over” into the futures contract expiring next (the “second nearby contract”). Futures with different expiry dates normally have different prices. Depending on the difference in price between the contract being sold and the one being bought, this can have either a positive or a negative impact on the investor. The financial effect of the rollover depends on the current situation on the futures market, which is expressed by the futures curve. The futures curve describes the relationship between futures contracts with differing expiry dates.