What characterizes a "spot market"?

A "spot market" is specifically characterized by the buying and selling of commodities for immediate delivery. In this type of market, transactions are conducted and settled almost instantly, meaning the actual transfer of goods and payment occurs right away. Spot markets are critical for ensuring that the delivery of goods, whether they are physical commodities or financial instruments, occurs without delay, providing immediate access to the commodity being traded.

In contrast, futures contracts, which are typically handled in a separate market, involve transactions that agree upon a price today for delivery at a future date. This is distinctly different from the immediate nature of spot market transactions. Similarly, markets focused exclusively on options deal with derivative instruments that provide the right, but not the obligation, to buy or sell an asset at a predetermined price within a specific time frame, which also deviates from the immediate exchange in spot markets. Lastly, the focus on long-term investments typically falls under categories such as equity markets or bond markets, where the investment horizon extends over a prolonged period, rather than the immediate exchange characteristic of spot markets.