What Is the ‘Cost of Carry’ and How Does It Apply to a Contract with No Expiry?

In traditional futures, the cost of carry refers to the expenses of holding the underlying asset until the contract's delivery date, including storage, insurance, and financing costs. For perpetual futures, there is no physical delivery or expiry, so the traditional cost of carry model does not apply directly.

Instead, the funding rate acts as a synthetic cost of carry. It represents the cost of maintaining a position relative to the spot price, effectively replacing the storage and financing costs with a dynamic payment system that reflects the prevailing market demand for leverage.