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Answer: Positive roll return
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: - A decline in the futures price produces a gain. - That gain from the passage of time and convergence is the **roll return**. So the roll return is **positive** for a short position in contango. Therefore, the correct answer is **C**.
Author: Manit Arora
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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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