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cjs238

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tT
发表于 2011-7-11 19:24 | 只看该作者

cash and carry and reverse

possible, remember, long, correct
Any interesting tips to remember these? Just did a reverse cash and carry and got slammed. Trying to think about it as logically as possible. Is my understanding correct?

Reverse cash and carry.

1) Fwd price is too low, so go long fwd. no cash needed.
2) You will need cash when fwd comes due - where to get it?
3) Sell spot short and use proceeds to buy a treasury that you will earn rfr for some time.
4) At maturity, sell the bond, use that cash to pay your fwd obligation, and give the commodity to whoever you initially borrowed it from (when you shorted)
5) earn rfr (lending cash), earn diffrence between spot and fwd, pay lease rate (gotta pay the guy for storing the asset).

Cash and carry.

1) Fwd price is too high, so sell fwd. no cash needed.
2) You will need the asset to deliver when fwd comes due
3) borrow at rfr and buy asset spot.
4) At maturity, deliver the asset, get cash and use it to pay your rf loan.
5) pay rfr (borrowed cash) , earn lease rate (guy has to pay you to store that asset you bought spot), earn diff between spot and fwd.
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lcw77

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2#
发表于 2011-7-11 19:24 | 只看该作者
Taken from John Broussard at NYSSA: "Use cash to pay for the spot and carry it into the future." Reverse is the opposite.

NO EXCUSES

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bodhisattva

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3#
发表于 2011-7-11 19:24 | 只看该作者
I also think if you purchase the asset you are paying the lease rate (storage cost) for cash and carry.

NO EXCUSES

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Analti_Calte

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4#
发表于 2011-7-11 19:24 | 只看该作者
John Broussard is AWESOME. He was at Windsor last week. made some dull material interesting.

Reverse Cash & Carry - All i remember is "Short the spot". The rest seems intuitive as you will have to go long the fwd. Invest the $ from shorting etc.

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mp3bu

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5#
发表于 2011-7-11 19:24 | 只看该作者
Spot cheap, borrow funds, buy spot, short forward. Use cash, carry asset to forward expiration, pay back loan.
Spot expensive, short sale spot, buy forward, lend cash. Reverse cash and carry.

Very intuitive naming actually.

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skycfa

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6#
发表于 2011-7-11 19:24 | 只看该作者
cash and carry = short forward
reverse cash and carry = long forward.

If you buy an asset you receive lease payments for "leasing or renting the asset", equivalent to a dividend.

If you borrow the asset, you pay lease or rent payments for borrowing the asset.

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bkballa

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7#
发表于 2011-7-11 19:24 | 只看该作者
thommo77 Wrote:
-------------------------------------------------------
> cash and carry = short forward
> reverse cash and carry = long forward.
>
> If you buy an asset you receive lease payments for
> "leasing or renting the asset", equivalent to a
> dividend.
>
> If you borrow the asset, you pay lease or rent
> payments for borrowing the asset.


Thanks

NO EXCUSES

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NakedPuts2011

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8#
发表于 2011-7-11 19:24 | 只看该作者
thommo77 Wrote:
-------------------------------------------------------
> If you buy an asset you receive lease payments for
> "leasing or renting the asset", equivalent to a
> dividend.
>
> If you borrow the asset, you pay lease or rent
> payments for borrowing the asset.

Lease rate shall always be accounted for ? What if actually no lease or rent occurs ?

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