Spot Price

Key takeaways

• The spot price is the market price at which an asset—such as a security, commodity, or currency—can be bought or sold for immediate delivery.
• Spot prices change constantly as buyers and sellers transact.
• Futures contract prices reference spot prices but reflect expectations about future supply, demand, carrying costs, and interest rates.
• Traders and producers use futures and options to hedge against adverse spot price movements.
• The relationship between spot and futures prices is described as contango (futures > spot) or backwardation (futures < spot).

Definition

The spot price is the current quoted price at which an asset can be purchased or sold for immediate ownership and delivery. It represents the value established by active transactions in the market at a given moment.

How spot prices work

• Every completed trade contributes to the spot price. High trading activity typically leads to more frequent price updates.
• For stocks, the price you see and pay when executing a trade is effectively the spot price; settlement and transfer occur behind the scenes through brokers and clearinghouses.
• The term is also used for currencies, commodities, cryptocurrencies, and exchange-traded funds (ETFs) that hold such assets.

Spot price and futures

Futures contracts set a price today for delivery at a future date. That futures price is influenced by the current spot price plus:
* Expected changes in supply and demand
* Carrying costs (storage, insurance, transportation)
* Opportunity cost or risk-free interest rates

Longer-dated futures often include greater carrying costs. As a futures contract approaches expiration, its price tends to converge toward the spot price.

Hedging with spot and futures

Producers, consumers, and investors use derivatives to reduce exposure to volatile spot prices:
* Example: A farmer expecting to sell a crop later can lock in a price by selling futures contracts, offsetting potential losses if the spot price falls.
* Hedging does not eliminate all risk but transfers price risk from one party to another.

Contango and backwardation

• Contango: futures prices are above the spot price. This can disadvantage long futures holders because the futures price may fall as it converges to spot.
• Backwardation: futures prices are below the spot price. This can favor long holders because the futures price may rise toward spot.
  Markets can shift between contango and backwardation depending on supply/demand dynamics and expectations.

Illustrative spot prices (examples)

The following are sample market quotes to illustrate typical spot prices:
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

(These figures are illustrative; consult live market data for current quotes.)

What determines the spot price

Spot prices are set by real-time interaction of supply and demand. Contributing factors include:
* Market sentiment and trading volume
* Economic data and interest-rate expectations
* Geopolitical events, weather, and supply-chain disruptions
* Inventory levels and production forecasts

Where to find spot prices

Live spot prices are available from:
* Brokerage platforms and trading terminals
* Financial news websites and market data providers
* Exchange websites and commodity price services
* Search engines and financial widgets for quick quotes

Bottom line

The spot price is the immediate market price to buy or sell an asset. It is a fundamental reference for trading, valuation, and derivatives pricing. Because it reflects current supply and demand, the spot price moves continuously and can be influenced by many economic, political, and logistical factors.