Skip to content
GetProfitable
Search
Dictionary

Cash market (physical market)

The market where the actual commodity changes hands now, at negotiated prices, as opposed to the standardized futures market.

Cash trades are bilateral: a specific cargo, a specific elevator, a specific delivery window, with credit terms and freight attached. Prices are usually quoted as a basis to a futures month rather than as a flat number, which is why futures matter even to people who never trade them.

Price discovery flows both ways. Futures give the cash market a reference; cash tightness drags futures into backwardation.

Example: a physical crude cargo prices as "Dated Brent plus $1.20 CIF Rotterdam". The flat price only becomes known when the futures reference is fixed during the pricing window.

Related: basis, convergence, exchange-for-physical, forward-contract

Educational only, not advice. Spotted an error? Post in Site Feedback.