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Explain How a Credit Spread Can Create a Negative Cost of Carry

A credit spread generates a net premium income upfront, resulting in a negative cost of carry.
Greeks.Live23.11.25

Explain How a Credit Spread Can Create a Negative Cost of Carry.

A credit spread is an options strategy where the premium received from selling an option is greater than the premium paid for buying a different option (same underlying, same expiration, different strikes). The net premium received is a credit to the account.

This credit generates a positive cash flow upfront, which effectively results in a negative cost of carry for the duration of the spread, reducing the overall cost of the hedged portfolio.

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