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.