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Cash & Carry Trade

Cash & Carry Trade

A cash and carry trade is an arbitrage strategy that involves simultaneously buying an asset in the spot market and selling a futures contract on the same asset. This trade exploits pricing discrepancies between the spot and futures markets to generate a risk-free profit. 

In a cash and carry trade, the investor purchases the underlying asset at the spot price and simultaneously sells a futures contract for the same asset at a higher price. By locking in a price differential between the spot and futures markets, the investor can earn a profit equal to the difference between the two prices. Cash and carry trades are commonly used in financial markets to capitalize on temporary market inefficiencies, hedge against price fluctuations, and generate returns through arbitrage opportunities.

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