DEFINITION of Spot
Spot represents, in trading, the price of an asset for immediate delivery, or the value of an asset at any exact given time.
WHAT IT IS IN ESSENCE
It is different from the asset’s futures price.
You can find it under name cash trades, also. These kinds of trades occur in the spot market and are characterized by the immediate. Or near-immediate delivery of the commodity in question.
Foreign currency, stocks, and commodities are typically transacted through these trades.
For example, 10 shares of stock XYZ on a $100 spot trade would be delivered upon the cash payment of $100.
These trades are the opposite of futures contracts, whereby two counterparties agree to transact some asset or commodity at a specific price and date in the future.
In this market, traders can buy or sell commodities, also.
For example, crude oil can be sell for a certain price per barrel on this market. The seller will deliver the oil over time, and at the price that traders paid.
With the arrival of internet trading systems and electronic money transfers, this trading becomes more prevalent.
The Stock Exchanges are the exclusive centers for trading inequities. So the platform of exchange is accessible only to brokers.
HOW TO USE
Any asset that can be traded as a future can be quoted as a spot price. It is often used in commodities. This trading means buying or selling any currency, commodity, stocks, or financial instrument for instant delivery.
Most of these kinds of contracts include physical delivery. Traders can consider experts’ tips for getting better results while trading in commodity markets.
The regulatory framework heavily favors the recognized stock exchanges. But almost banning trading activity outside the stock exchanges.
Only spot trades can be executed outside the stock exchanges.
In a specific sense, stock exchange traders are done through stockbrokers. While the spot trades can be executed anywhere in any place either in the country or outside the country. The regulatory framework bans trading activities outside the stock exchanges.
Traders can trade outside the stock exchanges but such trades are very risky.
Forex traders can also use spot prices, as deliveries of currency usually take place 48 hours after a trade has executed.