# How to calculate returns for interest rate futures

Say we have the active German government bond future, RXH3 and we wanted to calculate a series of returns for the active contract.

Would we calculate returns on the daily price difference? And if so, what would happen on the roll day? Or would be calculate returns on the Cheapest to Deliver bond?

• As you say results in futures are usually measured by the daily P&L (in Euros) on one contract, using RXH3 until the roll date (which is coming up in a few days) and the RXM3 contract after that. It is not standard to compute returns, but if you wanted you could divide the EUR P&L by the notional amount of 1 contract (which is 1000 times futures price) to find the return on notional amount. But why do you need a return in the first place? Commented Mar 2, 2023 at 14:18
• Because I'm wanting to have daily returns which I can then use in systematic strategies. So what would you do on the roll day? Look at the return of the back contract? I have a feeling this is wrong, but I can't define why Commented Mar 2, 2023 at 15:49
• @nbbo2 please see my comment above Commented Mar 2, 2023 at 16:54
• I agree it is a little weird because the notional amount (and so the base for the return calculation) changes when you roll to a new contract. But that is what I do and I don't know a better way. Commented Mar 3, 2023 at 8:37
• @nbbo2 let me add an additional point which disproves the back future return calculation on the roll: SCENARIO: there are no market movements except for mkt players rolling. If I choose arbitrarily roll day=roll-5 to calculate the return on the back future, and if everyone rolls their longs on that day, we will have a negative return on the front future and a positive return on the back. Given that's the day I chose to calculate the return, I would observe a positive return in my series. But in a continuous series, if the roll wasn't an issue, you would have 0 return. Commented Mar 3, 2023 at 12:43