Is reading 48 about investing in commodities or commodity futures? It seems as if the terms are used interchangeably. P118 says that the sources of return for a collateralized futures position are roll yield, collateral yield and spot price return. I understand roll and collateral yield. But how are we making a return on the spot price when we only own the future? A simple example would be appreciated.
Yes, they are interchangeable…How does one make money in futures? You answered the two difficult ones. The third one is through movement in the spot price itself.
But isnt movement in the spot price is captured in the roll yield? How do I break decompose the returns? Lets say i buy a $100 future maturing in 1 yr. If spot prices after one yr are $110, would my roll yield be 10%? What would my spot price return be?