A positive roll yield is generated when which condition is met?

A positive roll yield occurs when the price of a underlying asset in the futures market is higher in the future than it is in the current market. This situation often arises in a contango market, where futures prices are higher than spot prices.

When you buy a base currency at a forward discount, you are essentially locking in a price that is lower than the future expected price. As the expiration date of the futures contract approaches, the price of the future converges towards the spot price. If the market is in contango, the futures price rises closer to the spot price as the delivery date approaches, resulting in a positive return – the roll yield. Thus, by buying at a forward discount, you benefit from this upward movement in price.

Other options do not necessarily create a positive roll yield. Selling base at a forward premium, while it may seem advantageous, does not guarantee a positive roll yield and could even result in losses depending on market movements. Holding long-term futures can be beneficial but does not directly relate to the notion of roll yield. Trading multiple currencies simultaneously does not inherently create a condition for a positive roll yield without further context on the positions and market conditions.