Explanation:
In contango, the futures price is above the expected future spot price and tends to decline toward spot as maturity approaches, assuming the spot price stays constant.
For a short futures position:
So the roll return is positive for a short position in contango.
Therefore, the correct answer is C.
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Question 143.2. The roll return is the return due to the change in the price of the futures contract. If the commodity forward curve is in contango, and the spot price will be constant over time, what is the roll return on a short position in a futures contract on the commodity?
A
Negative roll return (a.k.a., roll yield)
B
Approximately zero roll return
C
Positive roll return
D
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