What is in this article?:
- Understand Carrying Charges
- Sell the carry?
Sell the carry?
It may sound foreign, but you know what it is to sell the carry. Do you recall your neighbor pricing corn before harvest, but instead of harvest delivery, he contracted for June delivery at a 25¢ premium? He sold the carry in the market.
Or last year, when your uncle decided to roll an HTA corn contract forward, exchanging the December base price for a 27¢ premium in the July contract. He sold the carry. Or two years ago, when you called your broker to sell May corn futures at a 20¢ premium to the December contract. You sold the carry.
Selling the carry allows you to capture a positive carry in futures prices, buy time for a better basis, hedge against lower prices and defer tax revenues to the next year. It is a powerful and profitable pricing alternative.