What does it mean to "roll over" in futures trading?

In futures trading, "rolling over" refers to the process of closing an existing futures contract that is approaching its expiration date and simultaneously opening a new futures contract with a later expiration date. This practice is essential for traders who wish to maintain their market positions without taking physical delivery of the underlying asset or settling in cash.

When traders roll over their contracts, they effectively extend their exposure to the market and can continue to speculate or hedge against price movements without interruption. This is a common strategy used to manage positions in commodities, financial futures, and other instruments where contracts have fixed expiration dates. The ability to roll over contracts allows traders to operate smoothly in the futures market without the need to liquidate their positions entirely.