Full Charge
A “full charge” is what happens to an iPhone after it’s been plugged in for, uh, what is it? Like, 187 hours?
It also refers to a futures price that covers all of the costs associated with its underlying asset, which is what we’re here to talk about today. At least, until our iPhone finishes charging.
Anyway, back to the futures…
Let’s say we’re into bananas. We’ve got a feeling they’re about to become the next kale, so we’ve decided to invest some serious coin in banana futures. Now the person who is currently in possession of the bananas (our underlying asset) incurs his or her own costs associated with growing, storing, and transporting those delicious little sources of potassium. When we pay a high enough price for our banana futures contract to cover all of those associated costs, that’s what’s known as a full charge. It’s also called a “full carry,” since we’re fully carrying all of the bananaholder’s additional costs.
Wait, is “bananaholder” not a real word? Well if it isn’t, it should be. We’ll look it up to be sure…once our phone is fully charged.
Related or Semi-related Video
Finance: What is carry?2 Views
And finance Allah shmoop What is Carrie shmoop Ah the
Holy Grail The warmth of the wealth The golden ring
worth fighting for That's what it is Partners in an
investment firm who get quote kari unquote for their investing
efforts essentially carry out of the office loads and loads
and loads of dough Well how does this magic happen
Well here's the math explanation You're one of three partners
at Joe Bob and Sill Ease Venture Capital Shop You
have five hundred million bucks under management under a two
and twenty five structure That is you get two per
cent of that money per year as fees just kind
of managed company And then you also get twenty five
percent of profits from that fund Those profits are your
carry questions How do you calculate them Yourjob to invest
that five hundred million dollars and make money for your
shareholders Your limited partners as they're called and you three
here are the general partners so you go along investing
and you take ten mil a year in fees and
that two percent of the five hundred mill and those
fees cover the salaries and small bonuses to the dozen
or so junior partners you have all Stanford MBA is
running around like chickens with their heads cut off squawking
for hot deals and cold calling CEOs of private companies
They bring you those deals and you say yea or
nay The two percent of your fee also covers you
know secretaries and rent and insurance and travel and conference
going in lawyers in an end So five years go
by and you've taken out ten mil a year in
fees each year for a total of fifty million dollars
As you've invested the remaining four hundred fifty million dollars
right you made eighty investments total Fifty of them went
totally bankrupt On twenty of them You got your money
back and on ten you made an average of while
twenty times your money or thereabouts Not all of the
investments were the same amounts but the result was that
on your four hundred fifty million dollars of actual infesting
you turned that money into two billion dollars When those
hot cos you funded early in their existence went public
in a night Pio and then six months and a
week later you distributed the shares you had in them
so the profit calculation is based on the original five
hundred million You Ray's not the fifty million of expenses
you had while administering the fund So on exactly two
billion dollars of realized profits you had one point five
billion dollars of profits Meaning you sit behind that fifty
million and expenses that's on you baby And no in
the venture capital world ofthe most nobody cares whether it
took you three years or six years or twenty years
to make those profits There is oddly little attention paid
to the time value of money in that world at
least in Silicon Valley So on that one point five
billion dollars your Carrie was twenty five percent or three
hundred seventy five million dollars You split it three ways
with your partners and each of you takes out a
cool hundred twenty five mil Even cooler you have likely
raised a new fund every two or three years So
you get these waves of dough coming in every few
years at least regularly And then after enough years of
doing this business while you get to buy one of
these yeah that's Carrie