What does "contract rollover" involve in the commodities market?

Contract rollover in the commodities market refers to the process of closing an existing position in a futures contract before it expires and simultaneously opening a new position in another futures contract with a later expiration date. This strategy is commonly used by traders who wish to maintain their exposure to a particular commodity without taking physical delivery of the asset at expiration.

The rollover is beneficial because it allows traders to extend their investment or hedging strategy without interruption, maintaining their market position. This process typically involves either selling the expiring contract and buying the new one or executing both transactions simultaneously to ensure seamless transition between contracts. This way, traders can effectively manage their investments, especially in markets where they expect continued price movements or volatility.

The other options describe different scenarios, such as buying multiple contracts or selling all assets to avoid settlement, which do not align with the specific definition of contract rollover in the context of futures trading. Additionally, transferring ownership does not directly pertain to rolling over contracts, as it focuses more on the transfer of rights rather than the strategic closure and opening of positions in the context of futures contracts.