The 'Roll Yield' Myth

Abstract

It is often asserted that futures investors periodically pay or receive the difference in futures prices across contracts with different delivery dates. This "roll yield" is mythical - no such cash flow occurs, at the time of "roll" trades or on any other date. While the term is a misnomer, the "roll yield" does contain useful information. It explains when futures gains exceed or fall short of spot price changes, and for storable assets it provides information regarding benefits to the marginal holder of a spot position. This paper clarifies the actual role of the "roll yield".