Table of Contents
- Understanding Spot Price
- Key Takeaways on Spot Price
- The Basics of Spot Price
- Spot Price and Futures
- The Role of Spot Price in Hedging
- Fast Fact on Financial Futures
- The Relationship Between Spot Prices and Futures Prices
- Examples of Spot Prices
- How Is the Spot Price Determined?
- What Might Affect the Spot Price?
- Where Can I Find the Spot Price for Stocks?
- The Bottom Line
Understanding Spot Price
Let me explain what spot price means to you: it's the price in the marketplace where you can buy or sell an asset like a security, commodity, or currency for immediate delivery.
Simply put, the spot price is the current price at which you can buy or sell an asset for immediate ownership and delivery after settlement.
In our global economy, you'll find that the spot price for most securities or commodities is fairly uniform worldwide once you account for exchange rates.
Contrast this with a futures contract price, which is an agreed-upon price for delivering the asset in the future.
Key Takeaways on Spot Price
Remember, the spot price is what you pay to buy or sell an asset for immediate delivery.
In today's interconnected global markets, spot prices for most securities are uniform after adjusting for exchange rates.
Unlike spot prices, futures contract prices are set for future delivery.
Spot prices help determine futures contract prices, and they can change constantly.
The Basics of Spot Price
Spot prices are always changing, and though you might not hear the term for stock trades, stocks always trade at the spot price.
That's the current quoted price set by the market; you buy or sell a stock at that price, then cash and stock are exchanged.
Your broker handles the transfer behind the scenes, and if you check your online account, you'll see the shares and the money withdrawn based on the spot price plus any fees.
You can conduct these transactions cost-effectively with online brokers.
Note that since the SEC approved the first Bitcoin spot ETFs in January 2024, spot price now also refers to the market price of cryptocurrencies like Bitcoin and related ETFs.
Spot Price and Futures
You'll often hear spot prices mentioned alongside commodity futures contracts for things like oil, wheat, or gold, because spot price serves as a reference for those futures prices.
A commodity futures price is typically based on the spot price, expected supply and demand changes, the risk-free return rate, and carrying costs like transportation or storage up to the contract's maturity.
Contracts with longer maturities usually have higher storage costs than those expiring soon.
The Role of Spot Price in Hedging
While spot prices matter for immediate trades of securities, commodities, or currencies, they play a big role in derivatives markets too.
Derivatives like options and futures let you lock in a price for future delivery of an asset.
By using them, you can hedge against risks from fluctuating spot prices.
This hedging is key for producers, like farmers, to protect crop values against price drops before delivery.
For example, if you own corn to sell later, you'd sell a futures contract matching your sale date; you're long on corn and short on futures, so a price drop in corn could be offset by futures gains.
Fast Fact on Financial Futures
Prices for financial futures are also based on spot prices for underlying instruments like Treasury bonds.
The Relationship Between Spot Prices and Futures Prices
The gap between spot and futures prices can be notable, and we call the relationship contango or backwardation.
Contango happens when the futures price is higher than the spot price; backwardation is when it's lower.
Backwardation benefits net long investors because the futures price often rises toward the spot price as expiration nears, allowing profits.
Contango favors short sellers as the futures price falls to meet the lower spot price, enabling gains.
Markets can shift between these states and stay in one for short or long periods.
Examples of Spot Prices
Here are some spot prices as quoted on April 2, 2025.
Commodities
- Gold: $3,121 per troy ounce
- Silver: $33.74 per troy ounce
- Cotton: $0.68 per pound
- Coffee: $3.89 per pound
- Sugar: $0.19 per pound
- Aluminum: $2,622 per ton
Stocks
- Apple: $223.89
- Microsoft: $382.02
- Occidental Petroleum: $49.38
- Costco: $965.08
- Dollar Tree: $77.57
- Tesla: $282.70
How Is the Spot Price Determined?
Spot prices come from demand and available supply; if many buyers and sellers are trading actively, each transaction sets the price on the spot, and high activity means frequent changes.
What Might Affect the Spot Price?
Supply and demand set the price, but factors like weather, geopolitical events, war, supply issues, and economic conditions can influence that interest.
Where Can I Find the Spot Price for Stocks?
When markets are open, you can get current quotes from financial news sites, brokerage websites, or search engines like Google; on Investopedia, check market overviews or search by company name or ticker for the spot price.
The Bottom Line
A spot price is what you'd pay to own an asset right away, determined by supply and demand through market activity.
These prices fluctuate constantly as buyer and seller interest shifts, influenced by factors from weather to wars and supply chain disruptions.
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