Any grain merchandising book will have insurance and rot figures... search amazon will answer all those questions. Art of grain merchandising is first on that comes to mind. Also the cost of carry is usually limited by arb shops financing cost. So add 200-250bps over the eurodollar and you will get a better number. But yes the ZW ZH spread @ -19.4 is way over carry and you can make 3.7% net of costs so if you can get financing below this you can do the arb.
If you buy Zw ZH spread at -19.5 you will have to lay out 5$ per bushsel (ie 5*5000) then in Dec you will recieve 5.195*5000$ - storage .165*5000*90days and then divide by (5*5000)*90/360 to get interest earned on original 5*5000
Thanks a lot BadMrFrosty, I have an other one for you: Soy oil Dec 09 Vs Soy oil Jan 10 = 0.41 while O'Bryan Commodities gives a 0.1875 cost of carry: http://www.obryancommodities.com/MktWatch/fcs.pdf. I don't understand how they calculate it, but that's more than 200 % cost of carry accordinng to them. Where is the problem? Thanks a lot.
?.....There's the cost of keeping the oil warm in the storage tanks so it doesn't solidify/stratify and clog up the processing facility during the bitter cold, Midwest winter.
In jan they recalculate the delivery differentials. So you could get delivered oil but depending on where you "randomly" get assigned you might have to pay a premium which could be like 40c or something. So I'd stay away from any spread from 09 over the new year unless you really know what you are doing.
Wow interesting... There are so many exceptions to the rule that if you are not a true specialist of a market/grain merchant/hedger..., it is hard to initiate full carry trades.