Rollover scenarios

The greater the interest rate spread between two currencies in a pair, the higher the potential rollover fee. For example, the interest rate differential between the (long) U.S. dollar and the (short) Japanese yen might result in a rollover of just $2 per lot, while the interest rate differential between the British pound (which has a much higher rate than the dollar) and the Japanese yen might produce a rollover of $15.

Rollover fees are typically posted in the “interest” column on most forex trading platforms every day between 2 and 5 p.m. ET. Here’s how rollover is calculated:

Rollover fee: (No. of lots*No. of units per lot*Yearly interest rate differential)/360*No. of days The following trade examples show the results of being either long or short the currency with the higher interest rate.

Trade 1: Sell 2 lots of USD/JPY on Monday and settle the next day

Lot value: USD 100,000 (JPY12,200,000)

Opening price: 122.00

Yearly interest rate differential: = JPY .0% - USD 1.25% = -1.25%

Calculation: USD 100,000*2*(-1.25%/360)*1 = $-6.94

Trade 2: Buy 2 lots of GBP/USD on Monday and settle the next day

Lot value: GBP 100,000

Opening price: 1.5600

Yearly interest rate differential: = GBP 4.00% - USD 1.25% = 2.75%

Calculation: GBP 100,000*2*(2.75%/360)*1 = $15.28 (Source for formulas: FXCM)

(These examples are approximations and are intended only to illustrate rollover calculations. Real results will differ based on prevailing rates and a firm’s policy toward assessing these fees.) Notice in the first trade the U.S. dollar interest rate is subtracted from the Japanese yen rate because it is a short position –– i.e., it represents selling dollars and buying yen. As a result, the position would be assessed a rollover fee of $-6.94. The second trade would earn a rollover fee of $15.28.