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Cash and carry
A type of basis trade where the arbitrageur purchases a financial instrument or commodity in a spot transaction and simultaneously takes a short forward position on the same instrument or commodity, generally by way of a futures contract.
(1) This type of arbitrage is used when the derivative is overpriced relative to the price of the underlying on the spot market.
(2) The term cash and carry and its related terms are often used in the general sense of basis trading, which includes both cash and carry trade in a strict sense and reverse cash and carry trade.
Translations
Synonyms and variations
- Buying the basis
- Cash and carry arbitrage
- Cash and carry trade
- Going long the basis