What is a spot commodity?

Commodity spot is a commodity traded by investors on the basis of immediate payment. This usually means that the commodity physically changes hands. It contrasts with the futures contract that is based on the right to conclude an agreement and does not necessarily include a payment made. This distinction can affect both the prices and the way the trades are carried out. This is, unlike securities or other financial products where the value comes from something else, such as ownership of the company or promise of future payments. Most commodities serve as raw ingredients in the production process. In this case, someone would buy 500 barrels of oil on the oil market literally pay their cash and receive oil. In many cases, physical Delivery would be elsewhere, for example, if a trader bought oil on behalf of the chain of the gas station, but the principle is the same: it is a physical and literal purchase of a commodity.

the reason why there are threeIndeed, to distinguish the point commodity in such a way, it is that many commodity stores instead include futures contracts. This is where what traders buy is actually a contract for the purchase or sale of a commodity on a future date at the agreed price. The contract may change hands several times before this date, with the price of the contract. Buyers and sellers will effectively gamble on how the price of the contract compares to the prevailing market price when it is due, which will determine whether they can immediately sell the commodity profit. Variations on this is a contract on options where the buyer has the right to complete the agreement on the agreed date at the agreed price, but is not obliged to do so.

One of the main differences between the commodity of the spot and the commodity futures is that commodity futures are considered fun. This means that each unit of commodity is considered to be interchangeable, which for financial purposes includes the use of agreed international standards. This is because most buyers and sellers FUTures commodities have a small intention to take over the commodity and simply sell it. With a point commodity, the buyer usually wants to see the commodity offered for quality because they will use it.