Definition for : Cash & carry trade or basis trading

"Cash & Carry trade" (or "basis trading") describes an Arbitrage transaction whereby the investor (the Arbitrageur) can benefit from an Arbitrage opportunity when (i) the Cost of buying a physical or financial asset, incurring the financial Costs, and insuring & warehousing it (as may be necessary, for instance for a commodity), is lower than (ii) the price at which the said commodity can be sold in the Future, and where such sale price can be locked-in by the investor by means of selling a Futures contract. On the specified date in the Futures contract, the investor will deliver the physical or financial asset and crystallize the Arbitrage Profit.
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