Rollover & basis
What is the Cost of Carry formula and how does it mathematically relate cash spot pricing to future expiration pricing?
By Easy Money Scanner · Educational reference · Not investment advice
The short answer
Cost of carry formula prices futures as spot price plus storage, insurance, and financing costs minus any yield, linking current cash prices mathematically to future expiration values.
How it works
For financial futures it's spot plus interest minus dividends; for physical commodities it includes storage and insurance, explaining why distant contract months trade at a premium in normal markets.
An example
Futures = Spot + (Interest + Storage - Yield).
Risk & limitations
Formula is theoretical; real pricing can deviate due to supply shocks.
Examples are hypothetical, not trade recommendations. US contract and regulatory references do not automatically apply in Canada. Rules, margin requirements and broker policies can change; confirm them with the relevant authority and your broker.