[Verse 1] When you invest in commodities today There's more than just the price at play Three components make your total return Let me teach you what you need to learn The spot return shows the price direction Up or down, it needs your attention That's the movement of the actual good Like oil or gold, as understood [Chorus] Spot, roll, and collateral too Three parts that make returns come through S-R-C, remember the key Components of commodity Spot shows the price, roll shows the curve Collateral earns what cash reserves Three together tell the story Of your commodity glory [Verse 2] Roll return comes from futures trading When contracts expire, they need upgrading You sell the near and buy the far This difference shows you where you are If the curve slopes up, backwardation Roll return brings compensation If it slopes down, contango's here Roll return might disappear [Chorus] Spot, roll, and collateral too Three parts that make returns come through S-R-C, remember the key Components of commodity Spot shows the price, roll shows the curve Collateral earns what cash reserves Three together tell the story Of your commodity glory [Bridge] Collateral return's the third piece now From cash invested, here's how While waiting for the commodity trade Your money earns interest, getting paid Treasury bills or money market rates This return component never waits Even when spot and roll are low Collateral keeps your money's flow [Verse 3] Add them up to see the whole Spot plus roll plus collateral Total return is crystal clear When all three components appear Some years spot might lead the way Other times roll saves the day Collateral's steady through it all Breaking down the total haul [Chorus] Spot, roll, and collateral too Three parts that make returns come through S-R-C, remember the key Components of commodity Spot shows the price, roll shows the curve Collateral earns what cash reserves Three together tell the story Of your commodity glory [Outro] Now you know the breakdown true Three components working through CFA knowledge in your mind Commodity returns defined
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