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."

BREAKING DOWN '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. Carrying Charge

    Cost associated with storing a physical commodity or holding ...
  2. Full Carry

    A futures market in which the price difference between contracts ...
  3. Spot Price

    The current price at which a particular security can be bought ...
  4. Commodity Futures Contract

    An agreement to buy or sell a set amount of a commodity at a ...
  5. Full Charge

    The event in which the price of a futures contract covers all ...
  6. Narrow Basis

    A condition found in futures markets in which the spot price ...
Related Articles
  1. Investing

    How to Trade Futures Contracts

    Futures is short for Futures Contracts, which are contracts between a buyer and seller of an asset who agree to exchange goods and money at a future date, but at a price and quantity determined ...
  2. Investing

    What Does Contango Mean?

    Contango​ is when the futures price of a commodity is higher than the expected future spot price.
  3. Trading

    Contango Vs. Normal Backwardation

    Learn about the futures curve and what its shape means for hedgers and speculators.
  4. Trading

    What Does Spot Price Mean?

    Spot price is the current price at which a security may be bought or sold.
  5. Investing

    Crude Oil Prices: Comparing Future Price Vs. Current Market Price

    Discover the differences between oil futures market prices and oil spot market prices and what leads to the differences between the two.
  6. Investing

    Grow Your Finances In The Grain Markets

    Hedging with futures can protect those who buy and sell commodities from adverse price movements.
  7. Investing

    How To Invest In Commodities

    Find out which futures, options or funds will be your perfect commodity portfolio fit.
  8. Investing

    Analyzing The 5 Most Liquid Commodity Futures (WTI, ZC)

    Crude oil leads the pack as the most liquid commodity futures market, followed by corn and natural gas.
  9. Trading

    Understanding the Spot Market

    A spot market is a market where a commodity or security is bought or sold and then delivered immediately.
  10. Investing

    Harvesting Crop Production Reports

    Find out what grain investors need to know to analyze USDA reports.
RELATED FAQS
  1. How are commodity spot prices different than futures prices?

    Find out more about commodity spot and futures prices, how to calculate a commodity's futures price, and the differences ... Read Answer >>
  2. How is the price of a derivative determined?

    Learn how different types of derivatives are priced, including how futures contracts are valued and the Black-Scholes option ... Read Answer >>
  3. How do commodity spot prices indicate future price movements?

    Find out more about commodity spot and futures prices, how to calculate commodity futures prices and how spot prices indicate ... Read Answer >>
  4. How can I calculate the notional value of a futures contract?

    Learn how the notional value of a futures contract is calculated, and how futures are different from stock since they have ... Read Answer >>
  5. What are some securities that have spot rates?

    Learn about the types of assets that have spot rates, and understand how the spot rate is used to determine the fair market ... Read Answer >>
  6. What types of items can you buy futures for?

    Learn what items futures may be purchased for, what a futures contract is and discover how the futures markets have greatly ... Read Answer >>
Hot Definitions
  1. Graduate Record Examination - GRE

    A standardized exam used to measure one's aptitude for abstract thinking in the areas of analytical writing, mathematics ...
  2. Graduate Management Admission Test - GMAT

    A standardized test intended to measure a test taker's aptitude in mathematics and the English language. The GMAT is most ...
  3. Magna Cum Laude

    An academic level of distinction used by educational institutions to signify an academic degree which was received "with ...
  4. Cover Letter

    A written document submitted with a job application explaining the applicant's credentials and interest in the open position. ...
  5. 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers. Generally, retirement ...
  6. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
Trading Center