What Is the Fundamental Difference between a Spot Trade and a Derivatives Trade?
A spot trade involves the immediate exchange of a financial asset, such as cryptocurrency, for cash or another asset at the current market price, with immediate delivery. A derivatives trade, however, involves contracts whose value is derived from an underlying asset, like an option or a future, and settlement occurs at a predetermined future date.
Spot trading involves owning the asset directly, while derivatives trading involves contracts representing a claim on the asset.
Glossar
Spot Trade
Execution ⎊ A spot trade involves the immediate execution of an order at the prevailing market price, facilitating the direct exchange of assets between buyers and sellers.
Derivatives Trading
Leverage ⎊ Derivatives trading, within cryptocurrency, options, and financial markets, fundamentally represents a contractual agreement where value is derived from an underlying asset, enabling amplified exposure without necessitating outright ownership.
Underlying Asset
Foundation ⎊ The concept of an Underlying Asset, within cryptocurrency derivatives and financial markets, establishes the core reference point for valuation and risk transfer.
Spot Trading
Settlement ⎊ Spot Trading involves the immediate purchase or sale of a cryptocurrency or financial asset for instantaneous delivery and settlement, contrasting with the delayed settlement inherent in futures or options contracts.