Roll Yield

Filed Under » , ,
Dictionary Says

Definition of 'Roll Yield'

The amount of return generated in a backwardated futures market that is achieved by rolling a short-term contract into a longer-term contract and profiting from the convergence toward a higher spot price. Profiting from roll yield is a common goal for many strategies used by traders in the futures market.
Investopedia Says

Investopedia explains 'Roll Yield'

Backwardation occurs when a futures contract will trade at a higher price as it approaches expiration compared to when the contract is farther away from expiration. Rolling into less expensive futures contracts allows the trader to consistently profit from the rise in a futures' price as it nears expiration.

The biggest risk to this strategy is that the market will shift to contango (opposite as backwardation). This type of changing market has led to major losses by various hedge funds in the past and is the reason why it should only be attempted by experienced traders.

Articles Of Interest

  1.

    Contango Vs. Normal Backwardation

    Learn about the futures curve and what its shape means for hedgers and speculators.

  2. ETFs Provide Easy Access To Energy Commodities

    Hedge against rising energy prices and diversify your portfolio with these funds.

  3. How Interest Rates Affect The Housing Market

    Understand how rate changes can affect home prices, and learn how you can keep up.

  4. Break Into Forex In 12 Steps

    Learn how to get started in forex trading.

  5. Choose A Fund With A Winning Manager

    We break down the key components of analyzing a fund manager's performance so you can find a winner.

  6. George Soros: The Philosophy Of An Elite Investor

    George Soros spent decades as one of the world's elite investors, and even he didn't always come out on top. But when he did, it was spectacular.

  7. Quants: The Rocket Scientists Of Wall Street

    Blend math, finance and computer skills to command a high - and well deserved - salary.

  8. Financial Career Options For Professionals

    Find out if spreading your wings to try a new career will make you soar or fall flat.

  9. Uncovering Oil And Gas Futures

    Find out how to stay on top of data reports that could cause volatility in oil and gas markets.

  10. 7 Unconventional Ways Businesses Can Borrow Money

    Find out how your business can get the money it needs - even when the bank says "no".
comments powered by Disqus
Marketplace
Hot Definitions

  1. Yield Elbow

    The point on the yield curve indicating the year in which the economy's highest interest rates occur. The yield elbow is the peak of the yield curve, signifying where the highest interest rates occurred.

  2. Xenocurrency

    A currency that trades in markets outside of its domestic borders.

  3. Wanton Disregard

    A standard of severe negligence. Wanton disregard is a very serious accusation that indicates that a person behaved extremely recklessly.

  4. Ultra ETF

    A class of exchange-traded funds (ETF) that employs leverage in an effort to achieve double the return of a set benchmark.

  5. Toehold Purchase

    A purchase of less than 5% of a target company's outstanding stockmade by an acquiring company. A toehold purchase of just under 5%, while not a significant stake in a firm, allows the shareholders a "toe-holds" grip on the company and its decision making.

  6. Samurai Bond

    A yen-denominated bond issued in Tokyo by a non-Japanese company and subject to Japanese regulations.
Trading Center
http://sp.fastclick.net/ad/tr/10858-64082-15546-0?mpt=eca0af97cfe817c7adacff27e8f1323c