The gain or loss a futures position realises from rolling an expiring contract into the next one, driven purely by the price difference between the two contracts, separate from any move in spot.

What is contango vs backwardation?

Contango is when the further-dated contract trades above the nearer one (upward-sloping curve); backwardation is the reverse. Contango costs a long roller; backwardation pays one.

Why do commodity ETFs lose money even when the commodity is flat?

Many hold front-month futures and roll monthly. In a persistently contango market, each roll sells low and buys high, creating a drag on returns even if the spot price is unchanged over the same period.

Does roll yield apply to index futures?

Yes — the same maths applies to any futures curve, though for equity indices the roll cost is usually driven by rates and dividends rather than storage economics; see the futures fair value calculator for that decomposition.

How is roll yield annualised?

Basis % is scaled by 365 ÷ (days between the two contracts' expiries), matching the frequency at which a position would actually roll over a year.

Can roll yield flip sign over time?

Yes — futures curves move between contango and backwardation as supply, demand and storage economics shift, so a roll yield calculated today is a snapshot, not a permanent feature of the market.

Futures

Roll Yield & Contango/Backwardation Calculator

Calculate the roll yield and curve state — contango or backwardation — from near- and far-month futures prices, annualised for your contract cycle.

Roll yield is the gain or loss from rolling a futures position out of an expiring contract and into the next one, driven by the price difference between the two contracts.

Annualised roll yield (long roller)

-12.17%

Basis (far − near): +$0.80
Basis %: +1%
Curve state: Contango

Positive roll yield benefits a long position rolling near → far; contango costs it, backwardation pays it.

Worked example

Crude oil's front-month future trades at $80.00 while the next month trades at $80.80, with 30 days between the two contracts' expiries.

Basis (far − near): $80.80 − $80.00 = +$0.80
Basis %: $0.80 ÷ $80.00 = +1.00%
Annualised: 1.00% × (365 ÷ 30) = 12.17%/year
Roll yield (long roller): −12.17%/year

The curve is in contango: a long position rolling from the front month into the next pays roughly 12.17% a year in roll cost — the classic drag behind long-only commodity ETFs like USO.

How this is calculated

Roll yield measures the gain or loss from moving a futures position out of an expiring contract and into the next one, using only the two contracts' prices:

basis % = (far price − near price) ÷ near price; annualised roll yield = −basis % × (365 ÷ days between contracts)

The sign flips deliberately: when the far contract trades above the near one (contango), a long roller sells the cheaper, expiring contract and buys the more expensive one, which is a cost — a negative roll yield. When the far contract trades below the near one (backwardation), the roll is a benefit instead.

Annualising scales the single roll by how often it would repeat over a year, using the actual number of days between the two contracts' expiries — not the time remaining to either one.

When to use this calculator

Use this before rolling a futures position from an expiring contract into the next one, to see the cost or benefit built into the current curve shape before it lands in your account as slippage.

It explains a puzzle many traders hit with long-only commodity products: the underlying can be flat or even up over a year while the position quietly loses money, purely from repeatedly rolling through a contango curve.

Curve-watchers use it the other way too — a market moving from contango into backwardation signals tightening near-term supply, and the annualised roll yield turns that curve shape into a concrete number.

Common mistakes

Assuming contango always means falling prices — roll yield is a cost/benefit of rolling the position, separate from whether the spot price itself rises or falls.
Using calendar days between today and expiry instead of the days between the two contracts being compared — the annualisation needs the roll cycle length, not the holding period.
Reading roll yield sign backwards — a positive basis (far > near, contango) is a negative roll yield for a long roller, and the two are easy to flip.

Frequently asked questions

What is roll yield?: The gain or loss a futures position realises from rolling an expiring contract into the next one, driven purely by the price difference between the two contracts, separate from any move in spot.
What is contango vs backwardation?: Contango is when the further-dated contract trades above the nearer one (upward-sloping curve); backwardation is the reverse. Contango costs a long roller; backwardation pays one.
Why do commodity ETFs lose money even when the commodity is flat?: Many hold front-month futures and roll monthly. In a persistently contango market, each roll sells low and buys high, creating a drag on returns even if the spot price is unchanged over the same period.
Does roll yield apply to index futures?: Yes — the same maths applies to any futures curve, though for equity indices the roll cost is usually driven by rates and dividends rather than storage economics; see the futures fair value calculator for that decomposition.
How is roll yield annualised?: Basis % is scaled by 365 ÷ (days between the two contracts' expiries), matching the frequency at which a position would actually roll over a year.
Can roll yield flip sign over time?: Yes — futures curves move between contango and backwardation as supply, demand and storage economics shift, so a roll yield calculated today is a snapshot, not a permanent feature of the market.