What is the meaning of Cash & Carry Trade?

Cash & Carry Trade is a strategy of trade where the asset is held by the investor till the delivery date of the contract. Thus, it means that an investor buys an underlying asset of the futures contract i.e. holds a long position in the security and sells it simultaneously by holding a short position in the futures contract for the same security. It is also known as basis trading.

Cash and Carry Trade is a stepwise process beginning with the purchase of security and then selling a futures contract for the same security. He thus holds the security till the futures contract expires post which he delivers the previously bought security. It is because of the long position component of this trade investor has the required knowledge of how much is made on the date of delivery and also the cost of the security.

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