#SpotVSFuturesStrategy Spot vs. Futures: Core Concepts

1. Spot Market:

* Definition: Immediate buying and selling of an asset at its current market price for immediate (or near-immediate) delivery.

* Ownership: You take direct ownership of the underlying asset.

* Settlement: Instantaneous.

* Pricing: Determined by real-time supply and demand.

* Purpose: Primarily for direct investment, long-term holding, or immediate consumption/use of the asset.

2. Futures Market:

* Definition: Trading of standardized contracts to buy or sell an asset at a predetermined price on a specific future date.

* Ownership: You do not own the underlying asset directly, only a contract.

* Settlement: At a future date (contract expiration) or by closing out the position before expiration.

* Pricing: Based on the current spot price, interest rates, dividends, cost of carry (storage, insurance, etc.), and time remaining until expiration. Can be in contango (futures price > spot price) or backwardation (futures price < spot price).

* Purpose: Primarily for hedging, speculation, and arbitrage.