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Cash-And-Carry Trade

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Dictionary Says

Definition of 'Cash-And-Carry Trade'

A trading strategy that involves the simultaneous trading of two similar securities in order to recognize an arbitrage profit. Also known as "basis trading" or "buying the basis."
Investopedia Says

Investopedia explains 'Cash-And-Carry Trade'

In a cash & carry trade, the first trade involves the purchase of a particular type of security, (usually a stock, index, or commodity), and the second involves a short trade in the asset underlying the security, (usually a futures contract).

Related Definitions

  •

    Arbitrage

    The simultaneous purchase and sale of an asset in order to profit from a difference in the price. It is a trade that profits by exploiting price differences of identical or similar ...
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  • Cost Of Carry

    Costs incurred as a result of an investment position. These costs can include financial costs, such as the interest costs on bonds, interest expenses on margin accounts and interest on ...
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  • Futures

    A financial contract obligating the buyer to purchase an asset (or the seller to sell an asset), such as a physical commodity or a financial instrument, at a predetermined future date ...
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    • Pairing Off

      An illegal practice of a brokerage firm offsetting short and long positions between house accounts by collecting cash payments without physically delivering the securities.
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    • Pairs Trade

      The strategy of matching a long position with a short position in two stocks of the same sector. This creates a hedge against the sector and the overall market that the two stocks are ...
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    • Arbitrage-Free Valuation

      1. The theoretical future price of a security or commodity based on the relationship between spot prices, interest rates, carrying costs, convenience yields, exchange rates, ...
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    • Reverse Cash-and-Carry-Arbitrage

      A combination of a short position in an asset such as a stock or commodity, and a long position in the futures for that asset. Reverse cash-and-carry arbitrage seeks to exploit pricing ...
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