Spot price

A spot price is the price of something with immediate settlement. It is most often used in currency and commodity markets in order to distinguish current prices from forward prices.

The term spot price is not often used in the context of securities because less forward trading takes place. Investors looking for that type of exposure generally use derivatives. Most trading is for delivery as soon as market mechanisms allow.

In commodity markets much of the trading is for future delivery. In some markets for it to be usual to quote prices with delivery dates because so much trading is done forward. Under these circumstances it is important to clarify that a quoted price is spot.

Spot prices are used for the settlement of futures and other derivatives in many markets where settlement is by payment rather than delivery.

Copyright Graeme Pietersz © 2005-2020