What is a Current Price?
Current price is the immediate price at which an asset can be purchased or sold. In the context of financial markets, current price is commonly referred to as the spot price or the real-time price. The term "spot price" might be used in relation to securities, commodities and other financial assets.
Quotes of current prices are available from exchanges and brokers. Spot price is necessary in order to initiate a contract. The spot price of an asset is arrived at through the process of discovery. Discovery is simply the day-to-day trading of assets at various prices that are determined by supply and demand.
Prices are quoted in terms of the bid price and the ask price. The bid price is the highest price that a buyer is willing to pay. The ask price is the lowest price at which a seller is willing to sell. The difference between these prices is called the spread.
The current price might fluctuate throughout market hours, but at any given time, there is a current price or spot price. Spot price fluctuations result in tradeable assets. Individuals who buy and sell these assets at various prices are known as traders. Traders can buy and sell at the current spot price or, in the case of derivatives, at a future price.
Securities, such as stocks, can be traded on the spot at the current price. They can be bought or sold at the spot price during market hours. Traders can also enter various contracts to buy or sell securities at various prices in the future. This form of trading is called option trading.
Options are derivatives. Current option prices are derived from the spot price of the underlying asset. A formula is then applied to the current price to determine the contract price. The spot price in the future might be higher or lower than the immediate spot price. The formula takes many factors into account.
Currencies are quoted as current price in relation to another currency. The spot price of the US Dollar Index is quoted in relation to six other international currencies. Trading a spot currency price is also known as foreign exchange, or forex.
Commodities can be traded at the current price. The spot price is quoted for immediate settlement. Settlement is the process of exchanging payment for delivery. Most commodities are traded at the forward price.
The forward price of a commodity is the spot price plus cost of carry. The forward price of a commodity is normally higher than the spot price but not always. The current price of a futures contract is based on the forward price of the commodity. Settlement is agreed upon at a future date.
Many traders chart the fluctuations of the real-time price of securities and commodities. Analyzing these price charts is known as technical analysis. Current price in relation to historical prices might help to indicate future price. Traders attempt to forecast future prices by analyzing real-time price relationships.
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