Spot price trading is essentially a pricing method of spot trading, and both parties do not need to participate in futures trading. In some commodity transactions, such as soybeans, copper, oil, etc., point price transactions are widely used.
For example, in the international trade of soybeans, the soybean futures price of Chicago Board of Trade (CBOT) is usually used as the basis of spot price; In the trading of copper concentrate and cathode copper, the copper futures price of London Metal Exchange (LME) or the New York Mercantile Exchange (COMEX) is usually used as the basis of spot price.
The reason why the spot transaction is priced with the futures market price is mainly because the futures price is formed through centralized public bidding, and the price is open, continuous, predictable and authoritative. Pricing with a reasonable futures price recognized by everyone can save the cost of searching price information and bargaining for traders and improve trading efficiency.
Different from traditional trade, in spot price trading, the two parties do not directly determine a price, but take the agreed futures price of a month as the benchmark and add or subtract a premium on this basis to determine it.
The premium is related to the distance between the futures contract months selected by the spot price, the freight between the futures delivery place and the spot delivery place, and the difference between the quality of futures delivery goods and the quality of spot delivery goods. In international commodity trade, the determination of premium and discount is also market-oriented because of the widespread use of spot price transactions. Many brokers will quote premium and discount, and traders can easily determine the level of premium and discount.