What Is A Spot Agreement

For example, if a wholesale company wants an immediate delivery of orange juice in August, it pays the price in cash to the seller and has the orange juice delivered within two days. Our exclusive spot prices are based on the two closest futures contracts in the relevant market. They reflect the underlying market, but do not have fixed expiration dates, making them suitable for both beginners and experienced traders. Spot prices are available in all of our foreign exchange, commodities and cryptocurrency markets, as well as our Bund market. A spot contract is an agreement that allows you to buy and sell an asset at the current market price, called the spot price. Spot contracts are most often associated with commodities, currencies, and bonds, but are also available in a number of markets such as cryptocurrencies and even real estate. When you trade spot contracts with us, you use spread bets and CFDs to speculate on the underlying market price of the asset instead of entering into a spot contract yourself. This means that you would never physically organize the exchange. Just like futures contracts, places are often repaid in cash rather than in the actual physical delivery of the traded asset, but with some minor differences. A futures contract specifies an agreement on the current date of payment and delivery to a future date. A forward price indicates a financial agreement that will take place in the future and is an agreed price for a futures contract.

Depending on what is negotiated, the futures price is determined by the spot rate. On the other hand, if the company needs orange juice to be available at the end of December, but believes that the goods will be more expensive during the winter period due to the drop in supply, it will not want to make a cash purchase, as the risk of deterioration is high. A futures contract would be a better fit for investment. Unlike a cash transaction, a futures contract involves agreeing on terms on the current date with delivery and payment on a specific future date. A spot rate is the interest rate of a given term to be used to discount the cash flows accumulated at that time….