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 Settlement

    A settlement method used in certain future and option contracts ...
  5. Cash Commodity

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

    The actual amount of money that is exchanged when commodities ...
RELATED FAQS
  1. What does it mean when futures prices are in contango?

    a. The basis is positive. b. Future prices are higher than cash prices. c. The market is in backwardation. d. ... Read Full Answer >>
Related Articles
  1. Options & Futures

    Contango Vs. Normal Backwardation

    Learn about the futures curve and what its shape means for hedgers and speculators.
  2. Active Trading

    Learn To Corral The Meat Markets

    Find out how to trade these hog-wild commodities.
  3. Options & Futures

    Avoid Future Shock By Protecting Your Portfolio With Futures

    Worried about protecting your portfolio of diversified stocks and assets? Using futures with correct strategies can help.
  4. Economics

    Iron Ore Market: Falling Into The Hands Of A Few

    The big iron ore mining companies have embarked on a drive to increase supply, reduce cost, and take market share.
  5. Options & Futures

    Give Yourself More Options With Real Estate Options

    Real estate options have many benefits, including a smaller initial capital requirement.
  6. Chart Advisor

    Commodity Traders Are Using Momentum To Profit From These Stocks

    Active traders are drawn to momentum strategies. These momentum winners of 2015 are worth a trader's second look.
  7. Economics

    This Is A Small Country With Huge Potential to Grow

    Trinidad and Tobago's increased revenue and economic success have been primarily generated by its energy sector, but it still might be best to diversify.
  8. Options & Futures

    How to Use Commodity Futures to Hedge

    Both producers and consumers of commodities can use futures to hedge. We explain, using a few examples, how to achieve commodity hedging with futures.
  9. Brokers

    OptionsXpress Vs. OptionsHouse: Which One To Pick?

    OptionsXpress and OptionsBroker -- each offers a price mix and set of services suitable for certain investors based on their trade approach and priorities.
  10. Options & Futures

    The Future Is Now: All About Futures ETFs

    A new security class - futures ETFs - is gaining popularity. We tell you how futures ETFs work and offer tips.

You May Also Like

Hot Definitions
  1. Fixed Cost

    A cost that does not change with an increase or decrease in the amount of goods or services produced. Fixed costs are expenses ...
  2. Subsidy

    A benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy ...
  3. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
  4. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
  5. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
  6. Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. ...
Trading Center