The current spot price of a commodity is $75.20. An investor purchases a 6-month futures contract on the underlying comm
Posted: Thu May 19, 2022 7:10 am
The current spot price of a commodity is $75.20. An investor
purchases a 6-month futures contract on the underlying commodity at
a price of $73.80. Which of the following statements regarding the
roll yield is most accurate?
A.
Roll return will only be negative if the spot price drops below
$73.80 at maturity.
B.
The market is in contango and if it stays, the roll return will
be either positive or negative.
C.
Roll return will only be positive if the spot price drops below
$75.20 at maturity.
D.
If the market stays in backwardation, the roll return will be
positive regardless of the movement in spot price.
Clear my choice
purchases a 6-month futures contract on the underlying commodity at
a price of $73.80. Which of the following statements regarding the
roll yield is most accurate?
A.
Roll return will only be negative if the spot price drops below
$73.80 at maturity.
B.
The market is in contango and if it stays, the roll return will
be either positive or negative.
C.
Roll return will only be positive if the spot price drops below
$75.20 at maturity.
D.
If the market stays in backwardation, the roll return will be
positive regardless of the movement in spot price.
Clear my choice