spot commodity investment & finance definition

A physical commod-ity that is traded in the cash market, in contrast to the futures market. A spot commodity that is bought or sold likely will be delivered to the counter-party on the other side of the transaction. A spot commodity contrasts with a futures contract, with which there is little expectation that the underlying commodity actually will be delivered to the buyer; futures contracts are used for hedging purposes, in order to protect the purchaser against price risk. Futures contracts are usually sold before expiration so the hedger doesn’t need to be involved in the transfer or delivery of the underlying contract.