Trader Resources : Hedging in the Futures Markets : Rolling a Hedge
Rolling a hedge forward is a technique which can extend the life a hedge. In some cases a hedger will want to hedge over a long peroid of time. When there is no contract available with a delivery date far enough in the future, a hedger must roll the hedge in order to obtain the risk protection he needs.

This is achieved by offsetting the futures position they have opened as it comes close to its maturity date, and then immediately opening a new position, with a later maturity date. While this technique can provide price protection for as long a period as desired, rolling a hedge is only feasible if the following conditions are met:

• Storage is available for continued storage of the cash product.
• Cash flow can be carried until the later date.
• An opportunity for profit exists such that rolling the hedge is worth the investment.

Using this strategy, a hedger can extend the life of a hedge as far into the future as required.

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