Spot Trade

What is a 'Spot Trade'

A spot trade is the purchase or sale of a foreign currency or commodity for immediate delivery. Spot trades are settled "on the spot", as opposed to at a set date in the future. Futures transactions that expire in the current month are also considered spot trades.

Also known as "cash trades".

BREAKING DOWN 'Spot Trade'

Spot trades are the opposite of futures contracts, which usually expire well before any physical delivery. Foreign-exchange contracts are the most common kinds of spot trades. If these kinds of contracts are not settled immediately, traders would expect to be compensated for the time value of their money for the duration of the delivery. Since these contracts are settled electronically, the forex market is essentially instantaneous.

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RELATED FAQS
  1. What are some securities that have spot rates?

    Learn about the types of assets that have spot rates, and understand how the spot rate is used to determine the fair market ... Read Answer >>
  2. How are commodity spot prices different than futures prices?

    Find out more about commodity spot and futures prices, how to calculate a commodity's futures price, and the differences ... Read Answer >>
  3. What is the difference between a forward rate and a spot rate?

    Learn about spot and forward contracts, how spot and forward rates are used for spot and forward contracts, and the difference ... Read Answer >>
  4. What are common factors that affect a security's spot rate?

    Learn the common factors influencing the spot rate for an asset including the bid-ask spread and the forward term structure ... Read Answer >>
  5. How is a share premium account taxed?

    Understand the difference between a spot rate and forward rate. Learn why someone would enter into a contract with a spot ... Read Answer >>
  6. Why do futures' prices converge upon spot prices during the delivery month?

    It's a fairly safe bet that as the delivery month of a futures contract approaches, the future's price will generally inch ... Read Answer >>
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