How Does the “Cost of Carry” Relate to the Basis in Traditional Finance?

In traditional finance, especially for financial assets and storable commodities, the cost of carry is the net cost of holding the physical asset until the futures expiration date. It includes financing costs (interest), storage costs, and insurance, minus any income generated.

In a normal market, the basis should equal the negative cost of carry, meaning the futures price is higher than the spot price by the cost of carry (Contango).