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Spot vs Futures

Spot prices settle immediately; futures prices are agreed today for a future date and embed carry costs until that expiry.

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Spot and futures are two ways of pricing the same market at different points in time. A spot price is for effectively immediate settlement, while a futures price is agreed today for delivery or cash settlement on a fixed date in the future, and therefore embeds financing costs, storage and expected income until that date. Retail platforms often list both: a "cash" or "spot" instrument that never expires and carries a daily financing charge, and a dated futures instrument that expires and has no daily swap but a wider spread. The economics are similar overall — spot traders pay the carry a day at a time, futures traders pay it up front in the price.

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Guide

How the Options Market Reaches the Spot Price

Option positions have to be hedged, and hedging means trading spot. What that flow is, why it clusters near certain rates, and why almost everything said about it is an estimate.

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