# Rolling to a non-front month future contract?

I hedge my US positions with M6B, a GBP/USD future.

Every time I roll my contracts, I ask myself "why is there so little liquidity beyond the next three months?" Surely there are people that need to hedge their positions for more than three months and can save cost by rolling say only once/twice a year, instead of doing it every quarter. Out of the fear that the lack of liquidity leads to inefficient pricing, I usually just roll to the next three months.

However, is it generally wise to roll to a non-front month contract, despite its low liquidity, if I know for a fact that I will keep this exposure in the long term?

• This is not an answer. My opinion (and it is what I do for 6E futures and what other traders that I know do) is that FX futures long term positions on the CME exchange should indeed be rolled once a quarter. – noob2 Dec 30 '20 at 20:15
• "is it generally wise to roll to a non-front month contract, despite its low liquidity, if I know for a fact that I will keep this exposure in the long term" - no free lunch, only trade-offs. Will lower transaction costs be of greater benefit than wider spreads in deferred futures? – user42108 Dec 30 '20 at 23:43
• Business as Usal – Soumirai Dec 31 '20 at 0:14

So, a future is basically like a forward. $$F_0(T) = S_0e^{T(r_{f,T}-r_{d,T}+x_T)}$$
The longer dated you go, the more you have exposure to the stuff in the exponential (rates in the two currencies, and the xccy basis $$x_T$$). That's a trading choice: do you want to trade pure spot FX (or close to it), or the forward (for which maturity?)