Spot Market

  

Categories: Trading

It’s the market you need to dip into if you need something now.

You find out that your fiancé has fallen in love with someone else while backpacking in Europe. You need to get on the next flight to Paris to try to win them back. You are now in spot market for plane tickets. You’re going to pay whatever the rate is for that particular flight leaving almost immediately.

The spot market sits in opposition to the futures market, where assets can be bought for delivery on some future date. There’s only one price from the spot market, because you need delivery right now. However, if you're more flexible about when you need something, you could shop around for different prices. If you could leave for Paris anytime this summer, you could shop for a departure time that had a cheaper price.

The term "spot market" comes up a lot in commodity and currency trading. For those items, there are futures and options markets, with contracts expiring in the future. And there's a spot market, which involves immediate delivery.

It also comes up for financial instruments. Again, there's a spot market for immediate delivery (the regular stock market is a spot market). Meanwhile, there's a separate futures and options market for contracts with forward dates.

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