DEFINITION of 'Cash and Carry Transaction'

A type of transaction in the futures market in which the cash or spot price of a commodity is below the futures contract price. Cash and carry transactions are considered arbitrage transactions.

BREAKING DOWN 'Cash and Carry Transaction'

The carrying costs in a cash and carry transaction are not deductible if the underlying commodity or security is part of a balanced position. These costs are instead capitalized and added to the basis.
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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 are arm's-length transactions determined by law?

    Determine if transactions are conducted at arm's length by checking if the parties to a contract are independent and transact ... 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. Are arm's length transactions always better than transactions not at arm's length?

    Transactions not at arm's length have real tax and other consequences for individuals and businesses, but they are not necessarily ... Read Answer >>
  5. What are the biggest risks associated with covered interest arbitrage?

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