Any purchase of a commodity for cash is known as a cash contract or spot contract. Purchase by credit, under which the payment is made after a certain number of days in future also come under cash (spot) contract.
Cash contract can be based on a fixed or negotiated price, a price index or the price fixed by an exchange based on demand and supply for the commodity.
A typical characteristic of commodity cash (spot) contracts is that most of them are settled by cash with out actual delivery of the commodity, but a handful of them end up as physical delivery contracts.
The prices in the spot market are also used to decide the prices of the derivatives markets.
Cash contract can be based on a fixed or negotiated price, a price index or the price fixed by an exchange based on demand and supply for the commodity.
A typical characteristic of commodity cash (spot) contracts is that most of them are settled by cash with out actual delivery of the commodity, but a handful of them end up as physical delivery contracts.
The prices in the spot market are also used to decide the prices of the derivatives markets.