Spot Price

See: Spot. See: Spot Rate. But don't see: Spot Run. (Not in union bylaws, that running thing.)

The spot price of an asset is the price at which it can be bought (or sold) right now.

Isn’t that just the regular price, you ask? Sure it is, for stocks and simpler securities...but not for derivatives and futures contracts. These more advanced vehicles often have both a spot price and a future price. The spot price is the right-now price, while the future price is a predetermined price that two parties agree on paying in the future for future delivery.

For instance, say the spot price for Spot at the dog shelter was $100. The dog shelter told you that, if you weren’t sure you wanted to adopt Spot, you could come back in a week, and they’d give you Spot for $80 if he was still at the shelter.

Why the lower future price? Because times are tough, and the shelter wants people do adopt doggos. Excess supply leads to lower prices. If the future price was higher, it means there would be an expectation of an increase in demand relative to the supply.

Why are we talking so much about future prices? Because future prices start with the spot price: the now-price. Companies that have to buy a lot of a commodity, like steel, might opt into a futures contract to lock-in a certain amount of steel at a certain price.

Even if the spot price ends up being lower, suppliers are willing to pay that premium for the stability of supply. But it always starts with the spot price. And Spot...because you haven’t started living if you’ve never had a dog. Life’s ruff without Spot...better snag him at the spot price.