Roll Yield
The gain or loss generated when rolling a futures position from an expiring contract into the next one, driven entirely by the shape of the futures curve.
Formula
Roll Yield = (Near Futures Price − Deferred Futures Price) / Near Futures Price
Roll yield is the return component generated (or destroyed) by the mechanical process of rolling a futures position forward — closing the expiring front-month contract and reopening in the next month. It is entirely independent of whether the spot price moves.
In backwardation, roll yield is positive: you sell the higher-priced near contract and buy the lower-priced deferred contract. The basis contraction accrues as gain.
In contango, roll yield is negative: you sell the cheaper near contract and buy the pricier deferred contract. This drag is the primary reason long-only commodity index products underperform spot prices over multi-year periods during contango regimes.
Sophisticated commodity investors use curve optimization — rolling into contracts further along the curve where the slope is flattest — to minimize roll cost.
Example
Natural gas front month: $2.80/MMBtu. Next month: $2.65/MMBtu. Rolling long: sell $2.80, buy $2.65 — locking in $0.15 positive roll yield per MMBtu (approximately 5.4% on the position). Repeat monthly and roll yield compounds into a meaningful return boost in sustained backwardation.
Related Terms
Backwardation
A futures market where near-term contracts trade at a premium to deferred contracts, generating positive roll yield and signalling near-term supply tightness.
AdvancedCarry / Cost of Carry
The net cost of holding a physical commodity position — storage, insurance, and financing minus any income or convenience yield.
AdvancedCommodity Index (GSCI / BCOM)
A rules-based basket of commodity futures — the S&P GSCI is production-weighted and energy-heavy; the Bloomberg Commodity Index (BCOM) is diversified with per-commodity caps.
AdvancedContango
A market structure where futures prices are higher than the current spot price, creating negative roll yield for long futures holders.
AdvancedFutures Curve
The graph of futures prices across successive delivery months for a commodity, revealing whether the market is in contango or backwardation.
IntermediateSpot-Futures Basis
The difference between the spot price and a futures price for the same commodity — the numerical expression of carry, storage, and convenience yield.
IntermediateSpread Trade (Commodities)
A trade that goes long one commodity contract and short a related one — exploiting price relationships between grades, delivery months, or related products.
Intermediate