Carrying Charge Market

AAA

DEFINITION of 'Carrying Charge Market'

A futures market where contracts with maturities further into the future have higher future prices relative to current spot prices. These higher future prices are associated with higher carrying charges, such as interest, insurance and storage for holding the commodities for a longer period of time. Because a carrying charge market incorporates the full cost to carry a commodity, it is also called a "full carry market."

INVESTOPEDIA EXPLAINS 'Carrying Charge Market'

If it costs $1 a month to insure and store a half bushel of corn, and the spot price is $6 per half bushel, a contract for a half bushel of corn that matures in three months should cost $9 in a carrying charge market. However, when a commodity is in low supply, spot prices might be higher than future prices. This higher price helps to ration the limited supply.

RELATED TERMS
  1. Full Charge

    The event in which the price of a futures contract covers all ...
  2. Futures Market

    An auction market in which participants buy and sell commodity/future ...
  3. Carrying Broker

    A commodities or securities broker who provides back office functions ...
  4. Carrying Charge

    Cost associated with storing a physical commodity or holding ...
  5. Cash Commodity

    In futures trading, the cash commodity is delivered for payments. ...
  6. Cash Market

    The marketplace for immediate settlement of transactions involving ...
Related Articles
  1. Your Futures Are In Good Hands With ...
    Options & Futures

    Your Futures Are In Good Hands With ...

  2. Commodities: The Portfolio Hedge
    Active Trading

    Commodities: The Portfolio Hedge

  3. A Guide To Investing In Oil Markets
    Options & Futures

    A Guide To Investing In Oil Markets

  4. An Introduction To Managed Futures
    Options & Futures

    An Introduction To Managed Futures

comments powered by Disqus
Hot Definitions
  1. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  2. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  3. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
  4. Net Sales

    The amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods and any ...
  5. Over The Counter

    A security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, etc. The phrase "over-the-counter" ...
  6. Earnings Before Interest After Taxes - EBIAT

    A financial measure that is an indicator of a company's operating performance. EBIAT, which is equivalent to after-tax EBIT ...
Trading Center