What exactly is a roll return in the context of commodity futures? Why is roll return positive for backwardation? If you have an example to illustrate this, it would be useful. - BN
Since the term structure of prices is downward sloping, you get positive roll return by rolling from a higher priced futures contract to a lower prices futures contract.
roll return is the return from appreciation in price of futures. in a backwardation, spot rate is higher than the futures rate, as futures approaches maturity, it has to appreciate to match the higher spot rate.
search the forum - this came up probably within the last 90 days and was discussed an answered. http://www.analystforum.com/phorums/read.php?13,673438,674015#msg-674015