A spot trade is a type of trade in which securities or commodities are bought or sold for immediate delivery. Spot trades are typically settled within two business days, and the price at which the trade is executed is based on the current market price at the time the trade is made. In the context of trading, a spot trade can refer to the purchase or sale of a wide range of assets, including stocks, bonds, currencies, commodities, and derivatives.
Spot trades are often used by traders and investors who are looking to take advantage of short-term market movements or who need to quickly buy or sell an asset in response to market events. For example, a trader might spot trade a currency if they believe that its value is about to change in the short-term, or they might spot trade a commodity if they believe that its price is about to increase.
Spot trades are different from other types of trades, such as futures or options, which are contracts that are settled at a later date. Spot trades provide traders with the flexibility to respond to market events in real-time and to take advantage of short-term price movements, while futures and options are typically used to hedge against price movements or to make more strategic investments over a longer time horizon.