Negative Carry, also known as "negative interest rate," occurs when the cost of borrowing is higher than the income earned on an investment. It can happen in various forms, such as when the interest paid on a loan is higher than the interest earned on an investment, or when the cost of carrying a position in a futures contract exceeds the income earned from that position.An example of negative carry is when an investor borrows money at a higher interest rate than the rate at which they can invest the money. Another example is when a trader is long in a futures contract where the cost of carrying the position (e.g. storage, insurance, etc.) is higher than the income earned from the position.Positive carry, on the other hand, is when the income earned on an investment is higher than the cost of borrowing. It is the opposite of negative carry. For example, when an investor borrows money at a lower interest rate than the rate at which they can invest the money, they will earn a positive carry.In general, negative carry is considered a disadvantage because the investor or trader is losing money while holding the investment or position. Positive carry, in contrast, is considered an advantage as the investor or trader is earning money while holding the investment or position.
