Execution and Contract Lifecycle · Forwards Trading Guide

Rolling changes the maturity of an exposure. It does not erase the economic result already accumulated on the original contract.

Separate the two economic steps

A roll generally closes or offsets an existing maturity and establishes exposure at a new maturity. The old contract has its own gain or loss. The new contract has a rate reflecting the current market and new delivery date. An FX swap can combine the near and far legs operationally, but the economics of each leg still need to be understood.

Keep the old loss visible

Imagine a business pays $4,000 to close an unfavourable forward, then enters a replacement at the current market rate with approximately zero initial value. The new trade does not undo the $4,000 payment. Assess the commercial exposure alongside the hedge, but preserve the realised result and any execution costs in the record.

Question an unchanged cash payment

A provider might offer an extension without an immediate settlement payment by embedding the existing value and financing in the replacement terms. That can create an off market contract rather than a free postponement. Request a breakdown of the old valuation, new market forward rate, financing adjustment and resulting contractual rate. Deferred cash does not mean a vanished loss.

Reassess the exposure before rolling

Check whether the invoice, quantity or investment still exists and whether its date or amount has changed. Repeatedly rolling an obsolete hedge can create a speculative position and accumulate costs. Define who approves extensions, when pricing is compared and how the new maturity fits available credit and liquidity. Record every roll as a deliberate decision.

Try it yourself

A hedge is closed for a $3,000 loss. A later replacement earns $1,200 and total fees across both trades are $150. What is the combined derivative result?

Show the worked answer

A loss of $1,950. The $1,200 gain partly offsets the $3,000 loss, and the $150 fees increase the remaining loss.

Further reading

Educational material. Numerical examples are hypothetical and exclude costs unless stated. Forward contracts create binding obligations and may require collateral or credit approval. Actual terms, access and risks depend on the agreement and jurisdiction.

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