Options University Blog

Negative Carry is a situation where in the financial position of futures or the financing security cost is higher than the yield.

For example, if any investor borrows $500 @ 12% and uses the same for buying a bond with yield of 9%, it is known as negative carry. This is because the investor needs to bear the additional interest burden.

However, this Negative Carry could be beneficial in case if the loan interest is tax deductible or if the bond is tax exempt.

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