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Spot Price

Spot price is the current market price of a particular commodity/security at which it can be bought or sold for immediate payment. The spot price is commonly used for pricing future contracts and to make projections about the future price movement of the security. Futures price is usually higher than the spot price, this is known as 'Contango'. And, if the future price is lower than the spot price, the underlying is said to be in 'Backwardation'.

 

Example:

Suppose the current market price of gold is Rs 20,000 for 10 grams and a seller agrees to sell you gold at market price. If you paid him Rs 20,000 for 10 gram of gold then the transaction happens at a price that is said to be at the spot price of gold.

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