For a commodity market that is in contango, an unchanged spot price over the life of a contract will result in a roll yield that is:
If spot never changes, and the market is in contango, doesn’t that guarantee that the roll yield will always be positive? Not following the reasoning on this one. (answer is C, negative)
you will have to roll the contract into a new contract that will be more expensive because the market is in contango, so the roll yield will be negative
silly me, prices are going up so you’re paying more per roll, making it negative.
Sit long enough without a break and your brain starts turning to mush…
Say during the start of the contract Spot price is 100 and Future Price is 105, at the time of expiry your future price should be equal to spot, so there is a loss 5 in this tansaction and if you want to roll over for next month contract obviously future price will be higher that the spot price due to TVM. so to roll over you have pay extra money to take the position.
some one can add if i am wrong in some where.