One
of the characteristics that sets the cash market apart from
a futures market is this immediate satisfaction and transfer
of ownership. Futures markets involve a longer period for
the transaction to be considered complete. With a cash market,
the investor immediately assumes ownership and is free to
do with the commodity or security as he or she wishes. While
both approaches are capable of helping an investor realize
a return on an investment, the cash market approach may
offer a level of speed and excitement that will attract
investors who prefer to be constantly on the move with the
investment portfolio.
One
of the common designations for a cash market is Spot
market. Spot markets get their name from the fact
that business deals are initiated and completed on the spot,
rather than requiring an extended period of time to resolve.
Cash markets tend to be somewhat fast paced, since the turnaround
time on a transaction is so short. Many investors may purchase
a commodity on the cash market this morning, see a rise
in the value by this afternoon, and sell before closing
and make a significant profit.
Many
physical commodities are bought and sold in this type of
market. Metals are one example of a commodity that is often
sold in a cash market. Grains like corn or wheat are also
commodities traded in this type of market. In addition,
some securities as well as some underlying equities and
bonds may also be sold in a cash market environment.
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