What Is the “Roll Yield” and How Does It Relate to Contango and Backwardation?

Roll yield is the profit or loss generated when a futures position is rolled from a near-term contract to a longer-term contract. It is positive in a backwardation market because the investor sells the higher-priced spot-proximate contract and buys the lower-priced longer-term contract.

It is negative in a contango market because the investor sells the lower-priced expiring contract and buys the higher-priced longer-term contract, resulting in a loss.