Cryptocurrency Q&A
What is the futures cost of carry?
What is the futures cost of carry?
Andrea
Fri Sep 06 2024
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6 answers
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Could you please explain in detail what the futures cost of carry entails? As an investor in the cryptocurrency and finance space, I understand that futures contracts involve buying or selling an asset at a future date at a predetermined price. However, I'm not entirely clear on how the futures cost of carry fits into this equation and how it impacts the overall profitability of such transactions. Could you elaborate on its significance and potential impact on my investment strategies?
6 answers
PhoenixRising
Sun Sep 08 2024
Another significant factor is the potential for obsolescence or depreciation of the commodity. Some commodities, especially those with a short shelf life or high perishability, can lose value over time, further increasing the cost of carry.
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Raffaele
Sun Sep 08 2024
The Futures Cost of Carry Model is a fundamental concept in finance, particularly relevant to commodity futures trading. It assesses the theoretical cost an investor incurs when holding a physical commodity over time.
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Elena
Sun Sep 08 2024
This model takes into account various expenses associated with owning and storing the commodity, which can significantly impact the price dynamics between the spot and futures markets.
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Maria
Sun Sep 08 2024
One primary component of the cost of carry is the expense related to physical inventory storage. This includes the cost of facilities, maintenance, and any other fees associated with safely keeping the commodity.
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SakuraBlooming
Sun Sep 08 2024
Insurance premiums also contribute to the overall cost of carry. Investors need to protect their assets against potential risks, such as theft, damage, or natural disasters, which adds to the financial burden.
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