Nifty Futures Rollover Strategies

As expiration dates for Nifty stock index futures approach, trading volume in calendar spreads rises at times to over 50% of total daily volume, making this transaction particularly important to execute efficiently for investors rolling over sizable positions into deferred month contracts. In this study futures data covering twelve recent Nifty futures expirations was used for rollover strategy construction, analysis and testing. We report here on the comparison of findings for three different strategies: optimally rolling an amount that minimizes average calendar spread volatility subject to practical trading constraints, rolling an equal number of Nifty futures daily, and rolling all contracts on a single day. We find in all cases the optimal strategy outperforms the other two commonly employed rollover strategies. Practical guidelines for rolling Nifty futures positions are discussed