Tom-next calculation example
Let’s say you trade the EUR/USD cross by buying €100,000 and selling USD at a price of 1.2266. In order to keep your position open beyond the expected delivery date, you would need to sell your €100,000 on tomorrow’s date, and then buy it back at the new spot price.
The current price of your EUR/USD position is 1.2278/1.2279: that is, 1.2278 to sell and 1.2279 to buy. However, the new spot rate is one point higher at 1.22795/1.22805. To roll your position, you would be selling at 1.2278 and then buying back at 1.22805 – effectively paying 2.5 points.
In this example we would say that the tom-next rate is 0.5/2.5. As a €100,000 EUR/USD trade is equivalent to $10/pt, rolling this position in the market would cost 2.5 x $10 = $25 (plus a small admin fee).