What do carrying costs in a forward contract primarily include?

In a forward contract, carrying costs primarily consist of both opportunity costs associated with capital and costs related to holding or managing the asset. Opportunity costs refer to the potential returns that an investor misses out on when choosing to invest capital in a specific asset instead of other investment opportunities. This is key in evaluating the profitability of holding the asset versus investing elsewhere.

Additionally, the costs of sorting the asset can involve any expenses directly related to maintaining the asset until the contract's maturity, such as storage or transportation expenses. These costs can significantly impact the overall profitability of the forward contract as they need to be accounted for when assessing the value and return of the position.

Understanding carrying costs helps investors make informed decisions when entering forward contracts, as these costs can erode profits or alter the risk profile of the investment. The other options do not encapsulate the essence of carrying costs in a forward contract as effectively, as they focus on specific expenses that might not broadly represent the comprehensive nature of carrying costs in this context.