Carry market and synthetic commodity position

[afterworkguinness]

Hi,
I'm confused by the statement in the chapter summary of McDonald chapter 6

"Synthetic commodities can be constructed using default-free bonds and commodity Futures,
and will always be preferred over their physical equivalent, except for in a carry-market where
the investor will be indifferent between the two"

If all commodities that require storage are said to be in a carry market (including gold and silver which are both financial commodities and consumption commodities), and in a carry market, the investor is indifferent to a physical position vs a synthetic one (cash + future/forward), when is the investor better served by a synthetic position than a physical position ?

Cheers

 

[kamranar]

When a trader is not allowed to take the direct positions in the market , he can do so by creating a synthetic position

 

[ShaktiRathore]

Hi(my personal thinking don't take it as final say but be speculative to my answer)
Synthetic position can be created by taking position in appropriate number of futures contracts. Instead of owning the commodity directly the trader takes position in the futures of the underlying commodity. Futures are more liquid and cost efficient to enter than taking the position of the underlying commodity directly. By Some commodities especially synthetic ones are difficult and costly to own due to high transaction costs and other delivery costs but the futures can create such synthetic position in more cost and time efficient manner. So synthetic positions created using futures are more preferable than owning the physical equivalent.
In a carry market the arbitrage principle holds so that the investor in commodity is indifferent between buying the futures or owning the commodity directly. A carry market will always reward the investor the same returns whether he hold the physical equivalent or the futures. e.g. includes storable commodities whose cost of carry is always positive.The cost of carry model applies here then only trader is indifferent between the two.

thanks