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Answer: The roll return (roll yield) is profitable to a long futures position during an inverted (backwardation) futures market
In a **backwardated (inverted)** futures market, futures prices are below spot prices and the curve generally slopes downward with maturity. As a long futures position rolls from a lower-priced deferred contract to a higher-priced nearer contract, the **roll yield is positive**. - **B** is true. - **A** is false: a futures curve can be a mix of normal and inverted across maturities. - **C** is false: a falling futures price does not necessarily mean backwardation. - **D** is false: gold can be inverted if convenience yield is sufficiently high; it is not always normal. So the correct answer is **B**.
Author: Manit Arora
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Q-147.3 Normal versus inverted futures market
Which of the following is TRUE about a normal/inverted futures market?
A
A futures market is either normal or inverted but cannot be a mixture
B
The roll return (roll yield) is profitable to a long futures position during an inverted (backwardation) futures market
C
A falling futures price necessarily implies backwardation
D
Gold must always be a normal market (assuming positive interest rates) because it has storage cost but does not pay a dividend
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