{"id":40890484,"date":"2026-04-15T19:18:22","date_gmt":"2026-04-15T13:48:22","guid":{"rendered":"https:\/\/stockviz.biz\/index.php\/?p=40890484"},"modified":"2026-04-15T19:18:23","modified_gmt":"2026-04-15T13:48:23","slug":"understanding-futures-rollover-cost","status":"publish","type":"post","link":"https:\/\/stockviz.biz\/index.php\/2026\/04\/15\/understanding-futures-rollover-cost\/","title":{"rendered":"Understanding Futures Rollover Cost"},"content":{"rendered":"\n<p>What is the difference between buying gold through an ETF over buying the front-month futures contract and constantly rolling it over? <\/p>\n\n\n\n<p>When you buy physical gold, there is a cost of carry involved (funding rate + storage), plus an ETF will charge an asset management fee. <\/p>\n\n\n\n<p>Futures also have a similar cost of carry <strong><em>plus<\/em><\/strong> a rollover cost. At expiry, the price at which you sell the expiring contract and buy the next month contract is not the same. The differential is the rollover cost.<\/p>\n\n\n\n<p>Typically, the farther you go out on the futures termstructure, the higher the premium to spot &#8211; the commodity needs to be financed and stored for longer. This is called contango.<\/p>\n\n\n\n<p>Currently, gold futures (GC) traded on COMEX has the following termstructure:<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" src=\"https:\/\/github.com\/stockviz\/blog\/blob\/master\/commodities\/mcx-gold\/futures-GC-termstructure.png?raw=true\" alt=\"\" \/><\/figure>\n\n\n\n<p>However, sometimes, the demand for near delivery is much higher than future delivery. This typically happens during a supply shock. When the near expiry futures trade at a premium to later expiries, the termstructure is said to be in backwardation. <\/p>\n\n\n\n<p>Currently, oil futures (CL) traded on NYMEX has the following termstructure:<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" src=\"https:\/\/github.com\/stockviz\/blog\/blob\/master\/commodities\/mcx-gold\/futures-CL-termstructure.png?raw=true\" alt=\"\" \/><\/figure>\n\n\n\n<p>During contango, rolling over long futures incurs a positive rollover cost, negative otherwise.<\/p>\n\n\n\n<p>For Gold Minis (GOLDM) traded on the MCX, the historical rollover cost at expiry has fluctuated within a wide band:<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" src=\"https:\/\/github.com\/stockviz\/blog\/blob\/master\/commodities\/mcx-gold\/GOLDM.roll_cost.png?raw=true\" alt=\"\" \/><\/figure>\n\n\n\n<p>What this means for our analysis is that if we merely lined up the closing prices of the front-month contract and calculated returns, we will be off by ~2.5% (not considering brokerage, fees and CTT):<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" src=\"https:\/\/github.com\/stockviz\/blog\/blob\/master\/commodities\/mcx-gold\/gold.fut.cum.png?raw=true\" alt=\"\" \/><\/figure>\n\n\n\n<p>So, to answer the question we posed at the beginning of this post, GOLDBEES or GOLDM?<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" src=\"https:\/\/github.com\/stockviz\/blog\/blob\/master\/commodities\/mcx-gold\/gold.etf-fut.cum.png?raw=true\" alt=\"\" \/><\/figure>\n\n\n\n<p>GOLDBEES, definitely.<\/p>\n\n\n\n<p>Previously: <a href=\"https:\/\/stockviz.biz\/2016\/12\/02\/investing-in-gold\/\">Investing in Gold<\/a><\/p>\n\n\n\n<p>Charts and code on <a href=\"https:\/\/github.com\/stockviz\/blog\/tree\/master\/commodities\/mcx-gold\">github<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>What is the difference between buying gold through an ETF over buying the front-month futures contract and constantly rolling it over? When you buy physical gold, there is a cost of carry involved (funding rate + storage), plus an ETF will charge an asset management fee. Futures also have a similar cost of carry plus &hellip; <\/p>\n","protected":false},"author":2,"featured_media":2106273,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3471],"tags":[13],"class_list":["post-40890484","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-investing-insight","tag-gold","entry"],"_links":{"self":[{"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/posts\/40890484","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/comments?post=40890484"}],"version-history":[{"count":0,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/posts\/40890484\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/media\/2106273"}],"wp:attachment":[{"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/media?parent=40890484"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/categories?post=40890484"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/tags?post=40890484"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}