The current market price of a security, commodity, or currency
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What is a Spot Price?
Thespot price is the current market price of a security, currency, or commodity available to be bought/sold for immediate settlement. In other words, it is the price at which the sellers and buyers value an asset right now.
Although spot prices can vary by time and geographic regions, the prices are fairly hom*ogenous in financial markets. The uniformity of prices across different financial markets does not allow market participants to exploit arbitrage opportunities from significant price disparities for the same asset in different markets.
Most frequently, spot prices are considered in the context of forwards and futures contracts. One of the reasons for the creation of such financial contracts is to “lock in” the desired spot price of a commodity at some future date because prices constantly change due to fluctuations in supply and demand.
The spot price is a key variable in determining the price of a futures contract. It can indicate expectations about fluctuations in future commodity prices.
Spot Price vs. Future Price
The main difference between spot prices and futures prices is that spot prices are for immediate buying and selling, while futures contracts delay payment and delivery to predetermined future dates.
The spot price is usually below the futures price. The situation is known as contango. Contango is quite common for non-perishable goods with significant storage costs.
On the other hand, there is backwardation, which is a situation when the spot price exceeds the futures price.
In either situation, the futures price is expected to eventually converge with the current market price.
More Resources
Thank you for reading CFI’s guide to Spot Prices and their difference from Futures Prices. To learn more about capital markets and related topics, check out the following resources:
FAQs
The spot price is the current market price of a security, currency, or commodity available to be bought/sold for immediate settlement. In other words, it is the price at which the sellers and buyers value an asset right now.
What is the difference between market price and spot price? ›
The spot price, aka the cash or market price, reflects what the commodity is trading in the current market or commodities exchange. It's what the commodity would cost you if you bought it today, for immediate delivery.
What is an example of a spot price? ›
For example, the spot price of corn (a commodity) will typically differ from the price of a futures contract for corn to be delivered six months from now. Nevertheless, derivatives such as futures, forwards, and options contracts base their prices on (or “derive” them from) the spot price of the underlying asset.
What is spot price now? ›
Gold Spot Price
| Gold Spot Prices | Gold Price | Spot Change |
|---|
| Gold Price Per Ounce | $2,584.90 USD | - ($12.30) USD |
| Gold Price Per Gram | $83.11 USD | - ($0.40) USD |
| Gold Price Per Kilo | $83,106.40 USD | - ($395.45) USD |
| Live Metal Spot Prices (24 Hours) Last Updated: 9/17/2024 4:57:41 PM ET |
The strike price of an option tells you the price at which you can buy or sell the underlying security when the option is exercised. The spot price is another term used for the current market price of the underlying security.
Is spot price a market price? ›
What is a Spot Price? The spot price is the current market price of a security, currency, or commodity available to be bought/sold for immediate settlement. In other words, it is the price at which the sellers and buyers value an asset right now.
How do spot prices work? ›
Spot price is the price traders pay for instant delivery of an asset, such as a security or currency. They are in constant flux. Spot prices are used to determine futures prices and are correlated to them.
Is spot price bid or ask? ›
SPOT PRICE: The price paid for a precious metal based upon immediate delivery. Spot prices have an ask and bid price.
How to check spot price? ›
Spot price is determined from polled prices using Trimmed Mean methodology wherein mean is computed after discarding those falling outside pre-determined boundaries on either sides.
What is the expected spot price? ›
The exchange rate between two currencies that is anticipated to prevail in the spot market on a given future date. It differs from the current spot rate primarily by the extent to which inflation expectations in the two currencies differ.
It may be possible to buy at spot price, but not likely today's spot price. You may be able to buy from an individual who purchased the metal at a lower price in the past. Dealers always charge a premium to cover various costs, including a small profit. They are a business, so that makes 100 percent sense.
How much is 1 oz of gold right now? ›
How much is 1 oz of silver? ›
Silver Spot Price
| Silver Spot Prices | Silver Price | Spot Change |
|---|
| Silver Price Per Ounce | $31.01 USD | $0.13 USD |
| Silver Price Per Gram | $1.00 USD | $0.00 USD |
| Silver Price Per Kilo | $996.99 USD | $4.18 USD |
| Live Metal Spot Prices (24 Hours) Last Updated: 9/17/2024 7:36:42 PM ET |
Can I sell an option below strike price? Options that have value in the marketplace can be bought or sold at any time, whether the underlying price of the stock is below or above the options strike price.
What does strike price tell you? ›
When it comes to options, strike prices are key in determining the value of an option and the potential for profit or loss. The strike price is the price at which the underlying asset, such as a stock or an exchange-traded fund (ETF), can be bought or sold by the option holder.
What if spot price is lower than strike price? ›
In the case of the put Option, if the spot price is less than the strike price, the option contract is ITM. However, in both cases, if the spot price is equal to the strike price, the option contract is said to be ATM. In the case of the call option, if the strike price is more than the spot price, it is OTM.
What is the difference between spot rate and market rate? ›
A spot rate is the current market price at which a stock, bond, commodity, or currency can be purchased or sold. A forward rate or forward price is a price set in advance between a buyer and a seller for execution on a future date.
What is the difference between market price and mark price? ›
Unlike the market price or the last trade price, both of which can be influenced by temporary market fluctuations and are expected to have a higher volatility, the Mark Price mitigates idiosyncratic price fluctuations and reduces the risk of forced liquidations.
What does spot price mean for silver? ›
Special Considerations. Silver's spot price is the amount that an investor pays to purchase a single ounce of the metal for immediate delivery. Investors are normally charged an additional premium on top of this price for any purchase they make. The value of silver is priced per ounce.
