Commodity futures

[MrSmart]

Can someone break down the total return of a futures contract? So we know that F=S*e^(r+u-y)t
Since total return is = collateral return + spot return + roll return, I find some overlap in the forumla.
r explains the collateral return, the spot return is the change in the spot price from initiation to maturity, but then what does roll return explain? The rolling over of contracts should be captured in changes in spot price, and any unrealized returns from the risk free rate. Does roll return imply convinence yield in this case?

 

[Mosstastic]

Y is your convenience yield, which is negatively correlated to future prices… as your convenience yield increases, your futures curve moves towards backwardation, thus implying your roll return since your spot price is now greater than future price.
Not sure if this is what you were asking, or not

 

[hei.so]

^So the roll return will be positive since the future price will converge to the spot price?

 

[Mosstastic]

Yes, and eventually move towards backwardation with a large enough convenience yield.
You’re rolling your futures contract forward so, you sell at todays (higher) price and buy at the (lower) futures price resulting in a positive roll yield.
Again, this is how I understood it