The spot price of something refers to the current price it can be bought at. This price is used to determine the pricing for some futures contracts.

When a futures contract is priced at the spot price, it is called a spot contract. This means the purchaser will pay based on the current price for goods they will receive at contract expiry. In contrast, a forward contract is a futures contract where the terms are agreed upon now, but the price payed will be the spot price at time of contract expiration. 

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AuthorIsabel Munson

A future (formally known as a futures contract) is a kind of derivative often used to take “bets” on the price of something increasing or decreasing. If an individual believed the price of something [a commodity or stock, for example] was going to change in the future, they could buy a future for that item and make money if the change in price occured.

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AuthorIsabel Munson
CategoriesDerivatives