hard · FRM Part 1 Financial Markets and Products

A commodity is currently in backwardation. A long-only futures investor rolling their position will likely experience:

1. No roll yield, because in backwardation the basis is zero at all points along the curve.
2. A negative roll yield, because they are selling an expensive expiring contract and buying a cheaper deferred one.
3. A gain from the 'convenience yield' which is paid out as a cash dividend to futures holders.
4. A positive roll yield, as the cheaper deferred contract they buy tends to converge upward toward the spot price as it approaches maturity.

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