Cash Market

AAA

DEFINITION of 'Cash Market'

The marketplace for immediate settlement of transactions involving commodities and securities. In a cash market, the exchange of goods and money between the seller and the buyer takes place in the present, as opposed to the futures market where such an exchange takes place on a specified future date.

Also known as the spot market, since such transactions are settled "on the spot."

INVESTOPEDIA EXPLAINS 'Cash Market'

Cash market transactions can take place either on a regulated exchange or over-the-counter (OTC). In contrast, transactions involving futures are conducted exclusively on exchanges, while forward transactions, such as currency forwards, are generally executed on the OTC market.

For a specific commodity, the price in the cash market is usually less than its price in the futures market. This is because there are carrying costs, such as storage and insurance, involved in holding a commodity until it can be delivered at some point in the future.

RELATED TERMS
  1. Search Theory

    A study of buyers and sellers who cannot instantly find a commerce ...
  2. Cash Contract

    A financial arrangement that requires delivery of a particular ...
  3. Backwardation

    A theory developed in respect to the price of a futures contract ...
  4. Cash Commodity

    In futures trading, the cash commodity is delivered for payments. ...
  5. Cash Price

    The actual amount of money that is exchanged when commodities ...
  6. Cash Settlement

    A settlement method used in certain future and option contracts ...
Related Articles
  1. Contango Vs. Normal Backwardation
    Options & Futures

    Contango Vs. Normal Backwardation

  2. Learn To Corral The Meat Markets
    Active Trading

    Learn To Corral The Meat Markets

  3. What does it mean when futures prices ...
    Investing

    What does it mean when futures prices ...

  4. Understanding Benchmark Oils: Brent ...
    Investing Basics

    Understanding Benchmark Oils: Brent ...

comments powered by Disqus
Hot Definitions
  1. Correlation

    In the world of finance, a statistical measure of how two securities move in relation to each other. Correlations are used ...
  2. Letter Of Credit

    A letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. ...
  3. Due Diligence - DD

    1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to ...
  4. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  5. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  6. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
Trading Center