The spot market is where securities are sold for cash and delivered immediately, whereas forward markets (or derivative markets) the delivery date is different from the negotiation date.

Question

BlackTom AI · Accepted Answer

The question contrasts the spot market with forward (derivative) markets in terms of delivery timing. 
Option 1: True. The statement that the spot market is where securities are sold for cash and delivered immediately is accurate, since in a spot transaction payment and delivery typically occur promptly (often T+2 for many markets), reflecting immediate settlement. Conversely, forward markets are characterized by a delivery date set in the future, which can differ from the negotiation date; these are often used to hedge price risk and derive value from anticipated price movements, and the actual delivery or settlement occurs at the specified future date or via cash settlement depending on the contract. This aligns with standard definitions of spot versus forward/derivative markets. 
Option 2: False. Interpreting the same statement as false would require asserting that spot markets are not cash-and-carry or that delivery is not immediate, or that forward markets do not involve a future delivery date. Such a view contradicts the conventional distinction between spot markets (immediate cash-and-delivery) and forward/derivative markets (future delivery or settlement). Therefore, labeling the overall statement as false would mischaracterize the fundamental relationship between these markets. 
Additional nuance: Some spot trades may settle with a short lag due to clearing cycles, but the core definition remains that spot involves near-term settlement, while forwards involve a contractual obligation to deliver at a future date. This nuance does not overturn the primary contrast presented in the statement. 
In summary, the true statement accurately reflects the standard definitions, while the false statement would misstate these core characteristics, making it incorrect in light of conventional market terminology.

The spot market is where securities are sold for cash and delivered immediately, whereas forward markets (or derivative markets) the delivery date is different from the negotiation date.

View Explanation

Log in for full answers

Similar Questions

We are able to sell or go short futures and forwards, even when we don't own them, because they are derivatives. This means a contract is created each time a buyer and seller make a new transaction.

From a financial standpoint, futures are virtually identical to forwards

The main difference between forward and futures contracts is that:

Part 1Financial instruments with returns tied to previously issued securities are called:Part 2 A. financial derivatives B. reversible bonds C. hedge securities D. convertible bonds

Which market involves the trading of derivative securities?

Which of the following is a hedging instrument? _____