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.
Glossar
Roll
Mechanism ⎊ A roll, within cryptocurrency derivatives, signifies the systematic closing of a near-term contract and simultaneous opening of a further-dated contract with the same underlying asset, effectively extending exposure.
Long Futures Position
Mechanism ⎊ A long futures position in cryptocurrency derivatives signifies an agreement to purchase an underlying asset at a predetermined price on a specified future date, representing directional exposure to anticipated price appreciation.