Roll Yield

The gain or cost from rolling futures positions as contracts expire, a hidden driver of returns.

Overview

Index funds cannot take delivery of cattle and crude, so they sell the expiring contract and buy the next month, and the price difference is roll yield: positive when the curve is in backwardation, adding return as each new cheaper month is bought, negative in contango, buying the expensive deferred. Roll dominated index performance in the 2000s oil scarcity and destroyed it in the 2010s contango hangover, with one oil ETF famously restructuring after the 2020 collapse. Optimized roll indices push expiries further out, trading liquidity for carry. Roll dates, when index money moves predictably, are themselves a widely watched trade, and total return equals collateral yield plus spot change plus roll.