Definition

Cost of Carry

Meaning ⎊ Total cost or return from holding a position including funding rates and interest to bridge spot and derivative prices.
Greeks.liveApril 5, 2026

Cost of Carry

The cost of carry represents the total cost associated with holding a financial position over a specific period. In the context of derivatives, it includes interest rates, storage costs, and insurance, though for crypto, it is dominated by funding rates.

It is the difference between the price of a derivative and the spot price of the underlying asset. If the cost of carry is positive, the derivative price is generally higher than the spot price, a condition known as contango.

If the cost of carry is negative, the derivative price is lower, known as backwardation. Traders use the cost of carry to determine if a derivative is overpriced or underpriced relative to the spot market.

It is a fundamental metric for pricing futures and options contracts. Understanding this cost is essential for arbitrageurs who look to profit from discrepancies between spot and derivative markets.

It essentially measures the premium or discount paid for holding the exposure.

Contango and Backwardation
Carry Trade
Contango
Arbitrage Pricing Theory
Cash and Carry Arbitrage
Gas Cost Analysis
Cash and Carry Trade
Cash and Carry

Glossary

Low Cost Data Availability

Data ⎊ Low Cost Data Availability, within cryptocurrency, options, and derivatives markets, signifies access to timely and granular market information at a reduced financial burden.

Cross-Chain Cost Abstraction

Cost ⎊ Cross-Chain Cost Abstraction represents a methodology focused on minimizing transaction expenses associated with interoperability between disparate blockchain networks, fundamentally altering the economic viability of multi-chain applications.

Social Cost

Cost ⎊ The social cost, within cryptocurrency derivatives and options trading, represents the broader economic and societal consequences extending beyond the direct financial transactions.

Carry Volatility Swap

Swap ⎊ A carry volatility swap is a derivative contract where two parties exchange cash flows based on the difference between implied volatility and realized volatility.

Negative Carry Cost

Cost ⎊ The negative carry cost, within cryptocurrency derivatives and options trading, represents a situation where the cost of holding an asset or position exceeds the income or benefits derived from it.

Cost of Capital

Cost ⎊ The cost of capital, within cryptocurrency markets and derivative instruments, represents the minimum rate of return required to compensate investors for the risk undertaken in providing capital.

Quantifiable Cost

Cost ⎊ In the context of cryptocurrency derivatives, options trading, and financial derivatives, cost represents the total expenditure incurred to execute a strategy or maintain a position.

Verifier Cost Analysis

Cost ⎊ Verifier cost analysis within cryptocurrency derivatives focuses on quantifying the economic burden associated with maintaining network consensus mechanisms, particularly in Proof-of-Stake systems.

Carry Trade Profitability

Asset ⎊ Carry trade profitability, within cryptocurrency markets, represents the realized premium derived from funding a long position in a crypto asset with a borrowed asset exhibiting a lower yield.

Data Feed Cost Optimization

Data ⎊ Within the context of cryptocurrency, options trading, and financial derivatives, data represents the raw material underpinning market analysis, algorithmic trading, and risk management.