How Does Contango Affect the Decision to “Roll” a Long Futures Position?

In a state of contango (futures price > spot price), a long futures position that is about to expire must be "rolled" into a new, longer-dated futures contract to maintain the exposure. Rolling involves selling the expiring contract and buying the new one.

In contango, this results in selling low and buying high, incurring a "negative roll yield" or "roll cost," which reduces the overall return of the long position over time.