current month Cost of carry is higher than next month meaning ?
many stocks showing in similar manner with cost of carry more than 11%.
how to understand this ?
Theoretically, Future price fair value=Spot Price+Cost of Carry-Dividend Payout.
If we take dividend out of consideration then cost of carry is equal to future price - spot price, higher cost of carry can be attributed to higher futures price compared to spot means future is trading at higher premium to spot. Theoretically this implies traders are willing to incur higher costs for holding the position and thus expect a rise in the underlying. As this month has already witnessed considerable fall traders are expecting the prices to close higher than present levels.
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