What Is The Spot Market?

The spot market is any currency or commodities market where trading takes place instantly. Meaning any trade for any goods or currency will be executed in real-time, on the spot. The spot market can include any trading destination from commodities markets trading beef share, to its most common forum, the Forex and currency markets. When spot markets are referred to within this context, they are also known as cash markets. The reason: simple. Money, real hard currencies from near any nation of origin, interchanged instantly between two parties. The key to keep in mind is that money changes hands at the time of the transaction for the current price. Delivery of the commodity or currency in question may be handed over at a future date. The price and payment however will be done in the instant. An excellent and probably the most common example of a spot market traded commodities would crude oil barrels. While for obvious reason no one is passing barrels of oil across the trading floor, the real-time price is what the trade is based on, and the money for the oil is paid on the spot. The oil will be delivered at a later time of course.

Commodities: Future VS. Spot Market

The list of items of value traded throughout the world is endless. Known as commodities, they can include anything rice, sugar cane, oil, gold, silver, foreign currencies, and so on. Essentially anything bought and sold the world over falls into this category. Commodities however are changed and invested for in two very different ways: Future markets and spot markets. In the spot or cash market, an investor or broker makes a trade based on that moment’s price in order to make a profit or in some cases dump a commodity falling in value. The futures markets are different. Unlike a cash market, a purchase of stock is made for a set amount to be executed at future date where the value of the commodity is yet unknown. In the future markets one is investing on what may become of a certain commodity, not what is happening to it today.

Related posts:

1. What Are Commodities?
2. Can I Trade Commodities?
3. What Is A Two-Way Price?
4. What Is Investing?
5. What Is A Call?