Use Case — Commodity Futures Roll

PM question

An oil futures index position has the near contract at $82 and the far contract at $85. Spot oil itself is expected to return +3% over the holding period. Is this a good position to hold through the roll, and what does the index's total expected return actually look like once the roll is accounted for?

Concepts

contango, backwardation, roll yield, total return decomposition (spot return + roll yield).

First exercise

Hand-calculate: 1. the curve state (pm.commodities.commodity_curve_state) 2. the roll yield (pm.commodities.roll_yield) 3. the approximate total return = spot return + roll yield — does the roll help or hurt here, and by how much relative to the spot-only view?

Extend

Compare against a second commodity trading in backwardation with the same spot-return assumption. See reference/commodities/roll_yield.md for why two commodities with identical spot performance can post very different total returns depending on curve shape.