Positive roll yield occurs in which market condition?

Positive roll yield occurs in a backwardated market. In this scenario, the futures prices for delivery in the near term are lower than the spot prices, which leads to an opportunity for investors to benefit. As the futures contracts approach expiration, the prices tend to converge with the spot price. Since the futures contracts are cheaper than the spot price, rolling over these contracts creates positive yield, as investors buy lower-priced contracts that will appreciate as they approach delivery.

Essentially, in a backwardated market, an investor can sell the futures at a higher price than they initially paid when they roll over to a new contract. This phenomenon becomes a source of return, known as the roll yield, which in this case is positive. This is contrasted with a contango market, where futures prices are higher than the spot price, leading to a negative roll yield, as rolling over contracts would result in purchasing contracts at inflated prices.