CFDs are complex financial instruments and carry a high level of risk due to leverage. A significant proportion of retail investors incur losses when trading leveraged products such as CFDs. You should carefully consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your capital.
If you’re wondering what “spot” means, it refers to the current price of an asset for immediate delivery. In English, it’s known as the spot price. When you buy an asset on the spot, you pay its present value and receive the asset directly, without deferring delivery to a future date.
The spot price reflects what an asset is worth right now. The futures price reflects what the market expects it to be worth at a later date. The two may differ because the futures price incorporates expectations regarding supply, demand, interest rates, and storage costs.
In commodity markets, this difference is called contango (when futures prices are higher than spot prices) or backwardation (when futures prices are lower than spot prices). Understanding this relationship is key for anyone trading in both markets.
The spot price appears in many markets. Its application varies depending on the asset and the region. In Latin America, the phrase “in cash” is commonly used to indicate immediate payment without financing.
Gold, oil, and grains have active spot markets. When you read “spot gold at $1,950 per ounce,” that is the price for immediate delivery, not for a futures contract.
In forex, spot trades are generally settled within two business days. For stocks, a spot purchase involves paying the market price and receiving the shares in your brokerage account.
The process for a spot trade is straightforward.
Check the spot price. This is the price displayed on the screen in real time.
Execute the order. Buy or sell at the current available price.
Settlement. The asset is delivered immediately or within a very short timeframe (T+0 to T+2, depending on the market).
There is no expiration date or contract to manage. The simplicity of the mechanism makes it accessible to traders of all experience levels.
A trader buys 100 ounces of silver on the spot market at $24 per ounce. They pay $2,400 and receive the silver (or its equivalent in their account). If the spot price rises to $26 and they sell, they receive $2,600. Their profit is $200. There was no futures contract, no expiration date, and no initial margin beyond the total price.
Many beginners confuse the spot market with other instruments. These misunderstandings occur frequently.
Confusing the spot price with the futures price when reading quotes.
Failing to consider settlement or custody costs.
Assuming that “spot” always means physical delivery.
Spot trading offers specific advantages.
Simplicity: You buy, pay, and receive without complex contracts.
Transparency: the price is the current market price.
No expiration date: there’s no deadline to manage.
Spot is the current price of an asset for immediate delivery. It differs from a futures contract because it does not incorporate expectations or time frames. It is the most direct way to trade and the benchmark for all other prices of the same asset.