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Spot trade

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Definition of Spot trade

Spot Trade Image 1

Spot trade

The purchase and sale of a foreign currency, commodity, or other item for immediate delivery.



Related Terms:

Balance of Merchandise Trade

The difference between exports and imports of goods.


Balance of trade

Net flow of goods (exports minus imports) between countries.


Balance of Trade

See balance of merchandise trade.


Basket trades

Related: Program trades.


Block trade

A large trading order, defined on the New York Stock Exchange as an order that consists of
10,000 shares of a given stock or a total market value of $200,000 or more.



Counter trade

The exchange of goods for other goods rather than for cash; barter.


Devaluation A decrease in the spot price of the currency



Spot Trade Image 2

Flat trades

1) A bond in default trades flat; that is, the price quoted covers both principal and unpaid,
accrued interest.
2) Any security that trades without accrued interest or at a price that includes accrued
interest is said to trade flat.


Floor trader

A member who generally trades only for his own account, for an account controlled by him or
who has such a trade made for him. Also referred to as a "local".


Forward trade

A transaction in which the settlement will occur on a specified date in the future at a price
agreed upon the trade date.


Free Trade

The absence of any government restrictions, such as tariffs or quotas, on imports or exports.


Information-motivated trades

trades in which an investor believes he or she possesses pertinent
information not currently reflected in the stock's price.


Informationless trades

trades that are the result of either a reallocation of wealth or an implementation of an
investment strategy that only utilizes existing information.


North American Free Trade Agreement (NAFTA)

an agreement among Canada, Mexico, and the United States establishing the North American Free trade Zone, with a resulting reduction in trade barriers


Posttrade benchmarks

Prices after the decision to trade.


Pre-trade benchmarks

Prices occurring before or at the decision to trade.


Spot Trade Image 3

Program trades

Also called basket trades, orders requiring the execution of trades in a large number of
different stocks at as near the same time as possible. Related: block trade


Publicly traded assets

Assets that can be traded in a public market, such as the stock market.



Registered trader

A member of the exchange who executes frequent trades for his or her own account.


Reversing trade

Entering the opposite side of a currently held futures position to close out the position.


Spot

For immediate payment and delivery, as opposed to future payment and delivery.


Spot curve, spot yield curve

See Zero curve.


Spot exchange rates

Exchange rate on currency for immediate delivery. Related: forward exchange rate.


Spot futures parity theorem

Describes the theoretically correct relationship between spot and futures prices.
Violation of the parity relationship gives rise to arbitrage opportunities.


Spot interest rate

Interest rate fixed today on a loan that is made today. Related: forward interest rates.


Spot lending

The origination of mortgages by processing applications taken directly from prospective borrowers.


Spot markets

Related: cash markets


Spot Trade Image 4

Spot month

The nearest delivery month on a futures contract.



Spot price

The current marketprice of the actual physical commodity. Also called cash price.


Spot rate

The theoretical yield on a zero-coupon Treasury security.


Spot rate

The current interest rate appropriate for discounting a cash flow of
some given maturity.


Spot rate curve

The graphical depiction of the relationship between the spot rates and maturity.


spot rate of exchange

Exchange rate for an immediate transaction.


Terms of trade

The weighted average of a nation's export prices relative to its import prices.


Terms of Trade

The quantity of imports that can be obtained for a unit of exports, measured by the ratio of an export price index to an import price index.


Theoretical spot rate curve

A curve derived from theoretical considerations as applied to the yields of
actually traded Treasury debt securities because there are no zero-coupon Treasury debt issues with a maturity
greater than one year. Like the yield curve, this is a graphical depiction of the term structure of interest rates.


Thinly traded

Infrequently traded.


Trade

A verbal (or electronic) transaction involving one party buying a security from another party. Once a
trade is consummated, it is considered "done" or final. Settlement occurs 1-5 business days later.


Trade acceptance

Written demand that has been accepted by an industrial company to pay a given sum at a future date.
Related: banker's acceptance.


Trade credit

Credit granted by a firm to another firm for the purchase of goods or services.


Trade date

In an interest rate swap, the date that the counterparties commit to the swap. Also, the date on
which a trade occurs. trades generally settle (are paid for) 1-5 business days after a trade date. With stocks,
settlement is generally 3 business days after the trade.


Trade debt

Accounts payable.


Trade Deficit

Deficit on the balance of merchandise trade.


Trade draft

A draft addressed to a commercial enterprise. See:draft.


Trade house

A firm which deals in actual commodities.


Trade Loading

A term used for channel stuffing in the domestic tobacco industry.


trade-off theory

Debt levels are chosen to balance interest tax shields against the costs of financial distress.


Trade on top of

trade at a narrow or no spread in basis points relative to some other bond yield, usually
Treasury bonds.


Traders

Persons who take positions in securities and their derivatives with the objective of making profits.
traders can make markets by trading the flow. When they do that, their objective is to earn the bid/ask spread.
traders can also be of the sort who take proprietary positions whereby they seek to profit from the directional
movement of prices or spread positions.


Uptick trade

Related:Tick-test rules


World Trade Organization (WTO)

the arbiter of global trade that was created in 1995 under the General Agreement on Tariffs and trade; each signatory country has one
vote in trade disputes


Forward discount

A currency trades at a forward discount when its forward price is lower than its spot price.


Forward premium

A currency trades at a forward premium when its forward price is higher than its spot price.


Philadelphia Stock Exchange (PHLX)

A securities exchange where American and European foreign
currency options on spot exchange rates are traded.


Value date

In the market for Eurodollar deposits and foreign exchange, value date refers to the delivery date
of funds traded. Normally it is on spot transactions two days after a transaction is agreed upon and the future
date in the case of a forward foreign exchange trade.



 

 

 

 

 

 

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