The cash market is a buying strategy in which the buyer makes an immediate payment that is equal to the current market price for commodities and other types of securities. Upon the receipt of the payment, the seller relinquishes all claims to the property and bestows ownership upon the buyer. In a sense, any type of retail transaction such as the purchase of groceries could be included in this definition, as the goods are received by the buyer upon rendering a cash payment for the products.
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 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.
This market is also called the 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. They tend to be somewhat fast paced, since the turnaround time on a transaction is so short. Many investors may purchase a commodity in the morning, see a rise in the value by this afternoon, and sell before closing and make a significant profit.
Many physical commodities, like metals, are bought and sold in this type of market. Grains, like corn or wheat, can be sold this way as well. Even meats, such as pork bellies, can be exchanged in this way. In addition, some securities as well as some underlying equities and bonds may also be sold in a cash market environment