What Does It Mean To "Roll" Bitcoin Futures? | ETF Trends

Ever since SEC Chair Gary Gensler indicated that the regulator might look more favorably on crypto products linked to Bitcoin futures, issuers have proposed a number of futures-based ETFs. 

Such products hold Bitcoin futures contracts rather than actual bitcoin or Bitcoin-adjacent stocks. In order to provide investors continuous exposure to Bitcoin futures, most futures-based funds will “roll” their futures contracts before they expire — but what does that mean? 

Rolling Bitcoin Futures: The Basics 

Bitcoin futures contracts are standardized agreements to buy or sell a set amount of bitcoin at a specific price. 

Bitcoin futures contracts are traded on the Chicago Mercantile Exchange and are cash-settled, meaning that whoever is holding the contract when it expires gets cash, rather than a physical delivery of the underlying asset. 

Futures contracts are rolled by investors interested in maintaining consistent exposure to a particular market with a similar risk position. Consistent exposure to Bitcoin futures allows investors to hedge against any direct exposure to Bitcoin. 

Rolling involves two steps: the closing of one contract, usually a contract very close to expiration, and the simultaneous purchase of the same futures contract with a later expiration date. 

The selling of the nearly expired contract and the buying of the next contract are usually done simultaneously in order to reduce slippage. 

Get Exposure to Bitcoin Futures With the Bitcoin Strategy ProFund (BTCFX)

Although numerous issuers have filed for Bitcoin futures ETFs, the SEC has yet to make a decision on any of the crypto products currently under review. 

However, for those looking for exposure to Bitcoin futures, mutual fund provider ProFunds offers a Bitcoin futures mutual fund, the first publicly available fund of its kind in the U.S. 

The Bitcoin Strategy ProFund (BTCFX), which launched at the end of July, primarily invests in Bitcoin futures contracts traded on the CME, in addition to holding short-term cash instruments such as U.S. Treasury Bills and Repurchase agreements. In unusual market conditions, BTCFX may invest in ETPS or Canadian ETFs trading in Canada. 

The futures contracts BTCFX primarily invests in are “front month contracts.” Front month contracts are the contracts closest to their expiration date and therefore closest to the current spot price of the underlying asset such as, in this case, bitcoin. 

BTCFX aims to provide investors with a more convenient and less volatile way to gain exposure to the Bitcoin market than buying and holding bitcoin directly. 

For more news, information, and strategy, visit the Crypto Channel.