What Does Spot Market Means?

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Spot market means that a commodity is purchased on the spot with an immediate settlement with the commodity being settled with the purchaser receiving the commodity on the spot or within a couple of days of the transaction. The spot market price can be based on the importance of the transaction to the purchaser or seller. For instance, if the seller has a product that the buyer is demanding, the seller can sell the product above or below the market price. However, if the sellers’ product has exceeded what they would like to have on hand, the seller can sell the product at a market price rather the product becoming irrelevant to the purchaser. According to the author of, “Futures and spot prices – an analysis of the Scandinavian electricity market”, “physical trade takes place in the spot market.” The advantage of on the spot market is flexibility of time the spot market is available to the 24 hours per day so that the seller can trade the commodities. The agreement is normally settled instantaneous with cash and the product is delivered to the purchaser and the account is usually set...

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