Understanding Cost of Carry for Nifty and Stock Futures
WHAT IS COST OF CARRY?
In derivates market, the cost of carry (CoC) of a futures contract is the cost incurred on holding positions in the underlying security until the expiry of the futures. The cost includes the risk free interest rate and excludes any dividend payouts from the underlying. CoC is the difference between the futures and spot prices of a stock or index. It is commonly used to interpret market sentiment for the stock or index, as higher values of CoC indicate traders are willing to pay more for holding futures. In the case of commodity futures, CoC also includes other expenses like storage.
HOW IS IT CALCULATED?
Theoretically, Future price fair
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In derivates market, the cost of carry (CoC) of a futures contract is the cost incurred on holding positions in the underlying security until the expiry of the futures. The cost includes the risk free interest rate and excludes any dividend payouts from the underlying. CoC is the difference between the futures and spot prices of a stock or index. It is commonly used to interpret market sentiment for the stock or index, as higher values of CoC indicate traders are willing to pay more for holding futures. In the case of commodity futures, CoC also includes other expenses like storage.
HOW IS IT CALCULATED?
Theoretically, Future price fair
Continue Reading
posted by Bramesh at
10:47 AM
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