Spot Trade

AAA

DEFINITION of 'Spot Trade'

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".

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  1. Time Value of Money - TVM

    The idea that money available at the present time is worth more ...
  2. Spot Commodity

    A commodity traded on the spot market. That is, with the expectation ...
  3. Spot Delivery Month

    The nearest month when a futures contract matures. The spot delivery ...
  4. Forex - FX

    The market in which currencies are traded. The forex market is ...
  5. Spot Market

    1. A commodities or securities market in which goods are sold ...
  6. Spot Price

    The current price at which a particular security can be bought ...
RELATED FAQS
  1. How do futures contracts roll over?

    Traders roll over futures contracts to switch from the front month contract that is close to expiration to another contract ... Read Full Answer >>
  2. Why do companies enter into futures contracts?

    Different types of companies may enter into futures contracts for different purposes. The most common reason is to hedge ... Read Full Answer >>
  3. What does a futures contract cost?

    The value of a futures contract is derived from the cash value of the underlying asset. While a futures contract may have ... Read Full Answer >>
  4. What are the goals of covered interest arbitrage?

    The goals of covered interest arbitrage include enabling investors to trade volatile currency pairs without risk as well ... Read Full Answer >>
  5. What are the main risks associated with trading derivatives?

    The primary risks associated with trading derivatives are market, counterparty, liquidity and interconnection risks. Derivatives ... Read Full Answer >>
  6. How can an investor profit from a fall in the utilities sector?

    The utilities sector exhibits a high degree of stability compared to the broader market. This makes it best-suited for buy-and-hold ... Read Full Answer >>
Related Articles
  1. Options & Futures

    A Primer On The Forex Market

    Moving from equities to currencies requires you to adjust how you interpret quotes, margin, spreads and rollovers.
  2. Options & Futures

    Combining Forex Spot And Futures Transactions

    The spot, futures and option currency markets can be traded together for maximum downside protection and profit.
  3. Forex Education

    The Foreign Exchange Interbank Market

    Can your forex broker offer you the most competitive pricing? Learn how the market's biggest players affect you.
  4. Options & Futures

    Using Options Tools To Trade Foreign-Exchange Spot

    Find out how delta, gamma, risk reversals and volatility can all help predict movements in the cash market.
  5. Insurance

    Futures Fundamentals

    For those who are new to futures but want a solid understanding of them, this tutorial explains what futures contracts are, how they work and why investors use them.
  6. Investing

    Is It Time To Buy Commodities?

    Despite the news, the Athens Stock Exchange is down less than 5 percent year-to-date, while the Shanghai Composite remains up more than 10 percent.
  7. Mutual Funds & ETFs

    5 Disadvantages of Mutual Funds Compared to ETFs

    In the mutual funds vs. exchange-traded funds debate, ETFs have some clear advantages.
  8. Mutual Funds & ETFs

    ETF Analysis: PowerShares DB US Dollar

    Discover how an ETF can be used to bet on multiple different currency futures contracts with the PowerShares DB Dollar Index Bullish Fund (UUP).
  9. Stock Analysis

    Southwest & Cheap Oil: The Perfect Combination?

    Discover how falling oil prices (and well-timed futures contracts) benefit Southwest Airlines.
  10. Forex Fundamentals

    Understanding the Floating Exchange Rate

    Floating exchange rate is the exchange rate between two currencies at any given time.

You May Also Like

Hot Definitions
  1. Nuncupative Will

    A verbal will that must have two witnesses and can only deal with the distribution of personal property. A nuncupative will ...
  2. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
  3. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
  4. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
  5. Killer Bees

    An individual or firm that helps a company fend off a takeover attempt. A killer bee uses defensive strategies to keep an ...
  6. Sin Tax

    A state-sponsored tax that is added to products or services that are seen as vices, such as alcohol, tobacco and gambling. ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!