Cost of Carry: How Holding Costs Affect Futures and CFDs

Most traders focus on when to enter or exit a trade, but what about the cost of holding a position overnight? This is where cost of carry comes into play. It’s easy to overlook, but these ongoing costs can gradually eat into your returns if you’re not paying attention.

What Is Cost of Carry?

Cost of carry refers to the overall cost of holding a financial position over time. This can include financing, storage, insurance, and other expenses, offset by any income the asset generates, such as dividends or interest.

These costs are separate from the asset’s price movements. For example, if you hold a long position on Brent crude overnight, your overall result depends not only on how the oil price changes but also on the financing cost of keeping that position open.

In futures trading, cost of carry helps explain why a contract’s price may differ from the current spot price. With CFDs, it typically appears as an overnight financing charge or credit, depending on the position and applicable financing rates.

Why It Matters More Than Most Traders Realise

This is where things can catch traders by surprise. A trade might look profitable at first, but once you factor in the cost of holding it, the final result can be quite different. This matters even more when you keep positions open for days, weeks, or even months.

The longer a position stays open, the more these costs can add up. Short-term traders may barely notice the difference, but for anyone holding positions over the medium to long term, cost of carry is something worth keeping a close eye on.

How the Cost of Carry Model Works

The cost of carry model helps explain the relationship between a futures contract and the spot price of its underlying asset. Put simply, a futures price generally reflects the current spot price, adjusted for the costs and benefits of holding the asset until the contract’s delivery date.

These adjustments can include financing costs, storage, insurance, and any income or other benefits that come with holding the asset. The exact relationship depends on the market and the type of contract.

The cost of carry model helps explain two common market conditions:

• Contango: This occurs when futures prices are higher than the spot price or a nearer-term futures contract. It can happen when the costs of holding an asset outweigh the benefits.
• Backwardation: This occurs when futures prices are lower than the spot price or a nearer-term futures contract. It may happen when the benefits of holding an asset outweigh the carrying costs or when supply is particularly tight in the near term.

Oil markets have experienced both conditions in recent years. In October 2025, Reuters reported that concerns about a potential supply glut were shaping Brent crude’s market structure, with near-term contracts trading below later-dated ones. This is known as contango. In such conditions, traders holding long futures positions may face a negative roll yield when they close an expiring contract and move into a more expensive one.

This is how the cost of carry model plays out in real markets.

Interest Rates and the Cost of Carry

Interest rates play a major role in the cost of carry. When rates rise, financing a position generally becomes more expensive, which can influence futures prices and overnight charges on CFDs.

For equity index futures, the cost of carry typically depends on the risk-free interest rate, minus any dividends paid by the underlying index. With currency pairs, it comes down to the interest rate difference between the two currencies.

This is why broader economic conditions matter, even if you’re focused mainly on price movements. Changes in interest rates can affect the cost of holding a position, adding another factor to consider before entering a trade.

Cost of Carry in CFD Trading

Unlike futures, CFDs don’t have a fixed expiry date. Instead, the cost of carry usually comes in the form of a daily overnight financing charge, often referred to as a swap or rollover fee.

If you keep a CFD position open past the daily cutoff time, typically around midnight server time, you may be charged or credited overnight financing. The amount depends on factors such as the direction of your trade, the instrument, and the applicable financing rates.

It’s worth checking these charges before opening a position, especially if you plan to hold it for several days or longer. You can usually find overnight financing rates for individual instruments directly on your trading platform before placing a trade. This makes it easier to understand your potential holding costs and factor them into your trading decisions.

Long vs. Short Positions

The cost of carry can affect long and short positions differently. Here’s how it generally works:

• Long positions: These often come with a financing charge because you’re paying to keep the position open, particularly when Alavancagem is involved.
• Short positions: Depending on the instrument and applicable interest rates, you may receive a credit or pay a charge to hold the position overnight.
• Matérias-primas: For assets such as gold and oil, storage and other holding costs can influence futures pricing and the overall cost of a position.

Costs vary from one instrument to another, so it’s worth checking the details before opening a trade. Overlooking overnight charges can add up over time and eat into your returns.

Practical Ways to Account for Cost of Carry

You don’t need a finance degree to keep your holding costs under control. A few simple habits can make a real difference.

First, check the overnight financing rate before opening a position you expect to hold for more than a day. Most trading platforms show these rates for individual instruments, so you can see what holding a position might cost.

Second, include these costs in your profit targets. For example, if you’re aiming for a 2% gain but expect overnight fees to add up to 0.5% over your holding period, that cost needs to be part of your calculations.

Finally, keep the cost of carry model in mind when trading futures. In a market with deep contango, rolling a position into a more expensive contract can eat into your returns. Ignoring this cost can leave you with results that fall short of what your market analysis suggested.

Carry Costs and Commodities

Ouro is a good example of how the cost of carry can affect a trade. Unlike stocks, gold doesn’t pay dividends or generate interest, so the cost of holding it is largely influenced by financing costs and interest rates. When rates are high, holding gold can become more expensive relative to interest-bearing assets, which may put pressure on its price, all else being equal.

Reuters’ coverage of the gold market has often highlighted how prices respond to changes in interest rate expectations. For traders, this is an important factor to consider alongside supply, demand, and broader market sentiment. Ignoring the cost of carry means overlooking part of the picture when assessing a trade.

Putting It All Together

Cost of carry isn’t just a background detail. It’s part of the trade and can make a real difference to your overall returns. The cost of carry model helps explain why futures prices differ from spot prices and how those differences affect the cost of rolling positions or choosing between instruments.

For CFD traders, cost of carry typically shows up as overnight financing charges or credits. For futures traders, it influences the relationship between spot and futures prices and the cost of moving into a new contract.

Before opening a position, take the time to check the relevant financing rates and contract specifications on your trading platform. Factoring these costs into your plans from the start gives you a clearer picture of what a trade could actually cost.

Trading without understanding your holding costs means missing part of the picture. The information is available, so make it part of your analysis.

AVISO LEGAL: This content is for general informational and educational purposes only and should not be considered investment advice or investment recommendation.