Define ‘Roll Yield’ and Its Impact on a Futures-Based ETF.
Roll yield is the gain or loss generated when a futures-based ETF closes out (rolls) expiring near-month futures contracts and replaces them with new, longer-dated contracts. In a contango market, the roll yield is negative (a loss) because the new contracts are more expensive.
In a backwardation market, the roll yield is positive (a gain).