I'm confused about the definition of roll returns:
rolling a futures contract usually translates into rolling over an expiring contract to a contract with a longer expiration date, so to capture profits depending on whether the market is in backwardation or ini contango.
You don't usually have to refer to the underlying when calculating roll yield, unless I'm missing something here. Some clarification would help
Thanks
Usually, roll yield is calculated for the futures contract close to the expiration. Hence the term spot price of the underlying asset used interchangeably with the front contract which is being exited as both futures and spot prices merge at expiration.
Futures-spot divergence is known as the futures “roll yield,” which can be defined as
Roll Yield = Futures Return – Spot Return
You can get more details on it from here: https://thehedgefundjournal.com/deconstructing-futures-returns/
I hope this helps.