Roll Yield

Roll yield refers to the gain or loss realized when rolling over futures contracts as they approach expiry. In commodities trading, including oil, it represents the impact of shifting from a near-month to a longer-dated contract.

For example, if a Brent crude trader holds a front-month contract that is nearing expiry, they may sell it and purchase the next-month contract. The price difference between these contracts generates the roll yield, which can be positive (backwardation) or negative (contango).

Roll yield is a key factor in evaluating returns from futures-based strategies. Traders must account for it when assessing total portfolio performance, especially for long-term positions or index-tracking strategies. It also affects hedging efficiency and cost of carry.

Understanding roll yield helps market participants anticipate profit or loss beyond spot price movements, enabling more informed trading and risk management decisions.