Q.What is meant by Spot Market and Future Market ?

Classified by the nature of transaction: a spot market involves immediate delivery and payment, whereas a future market involves delivery and payment at an agreed later date.

Markets can be classified on the basis of the nature of the transaction into spot markets and future markets.

Spot Market (Cash Market): A spot market is one where goods are physically delivered and paid for immediately, i.e. "on the spot." The transaction is completed then and there, with exchange of goods and money taking place at once. Everyday cash purchases in shops and mandis are examples.

Future Market (Forward Market): A future market is one in which the buyer and seller enter into a contract now to buy or sell goods, but the actual delivery of the goods and the payment take place at a fixed date in the future, at a price agreed upon today. Such markets deal in forward or future contracts and are often used to guard against price fluctuations.

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