Roll Yield
Roll yield is the gain or loss from rolling a futures contract to a later expiration — the difference between near and far contract prices.
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Definition
Roll yield is the gain or loss from rolling a futures contract to a later expiration — the difference between near and far contract prices.
Use case
Used in derivatives workflows, analysis, and technical interviews.
Judgment check
Useful only when the assumptions and inputs behind the metric are understood.
Deep dive
How to think about Roll Yield
Positive roll yield (backwardation): Selling high-priced near contract, buying lower-priced far contract — profit. Negative roll yield (contango): Selling low, buying high — loss. Roll yield significantly impacts commodity ETF returns, often causing them to underperform spot commodity prices.
Example: Oil futures curve in contango: Front month $80, 3-month $85. ETF rolls monthly: sells $80, buys $85 = -$5 loss per roll. If spot oil stays flat at $80 all year, the ETF might lose 15%+ from rolling losses alone.