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<p><strong>What is Contango, Backwardation, and Roll Yield?</strong></p><br/>


<p>ROLAND MORRIS: Contango describes the shape of a futures curve with appreciating prices.  This may cause problems when you're carrying such a product as an investment, because when it comes to the roll date, you must sell the forward contract and replace it by purchasing the next contract at a higher price. This creates negative roll yield, which is similar to negative carry in other investment products. </p><br/>


<p>MORRIS: Backwardation describes a forward futures curve with declining prices.  This is a situation where you can create positive roll yield.  When it comes time to roll the contract, you must sell the front contract at the higher price and replace the position with the next contract at a lower price.  This creates positive roll yield, which is very similar to positive carry in other investment products.</p><br/>

<p><strong>Drivers of Returns</strong></p><br/>

<p>MORRIS: We've now discussed roll yield, both negative and positive, and what creates roll yield.  It is an important component in the commodity investment. There are three drivers of returns: the return on collateral or unused cash, the appreciation of the underlying commodities, and roll yield.</p><br/>

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<p><strong>IMPORTANT DISCLOSURE</strong></p><br/>

<p>The views and opinions expressed are those of the speaker and are current as of the video’s posting date. Video commentaries are general in nature and should not be construed as investment advice. Opinions are subject to change with market conditions. All performance information is historical and is not a guarantee of future results. For more information about Van Eck Funds, Market Vectors ETFs or fund performance, visit <a title="" href=""></a>. Any discussion of specific securities mentioned in the video commentaries is neither an offer to sell nor a solicitation to buy these securities. Fund holdings will vary. All indices mentioned are measures of common market sectors and performance. It is not possible to invest directly in an index. Information on holdings, performance and indices can be found at <a title="" href=""></a></p><br/>

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