Spot price
The price at which the underlying asset trades in the cash market for immediate delivery — the anchor from which futures prices, basis, moneyness and final settlement are all measured.
In plain language
The spot price is today's cash price: what you pay to buy the asset outright and take it home now. In the workbook's gold example, paying the goldsmith Rs 62,130 for 10 grams on 11 May 2024 and walking out with the gold is "a cash market transaction at a price referred to as spot price".
For an equity derivative the spot price is the underlying price — the price at which the underlying asset trades in the cash market. On 3 October 2025 the Nifty's underlying value was 24,894.25 while its October futures closed at 25,006.60. Those are two different numbers, and a great deal of this paper is about the gap between them.
How it works
Basis is the difference between the spot price and the futures price. When the futures price is above spot, basis is negative: 24,894.25 − 25,006.60 = −112.35. Whatever it is during the contract's life, basis becomes zero at maturity, because final settlement takes place at the closing price of the underlying.
Fair futures price starts from spot: Fair futures price = Spot price + Cost of carry − Inflows, or F = S(1 + r − q)^T. If futures trade above fair value, arbitrageurs buy spot and sell futures; below it, they do the reverse. That is what ties the two prices together.
Expectations model. An alternative view holds that the futures price is the expected spot price at maturity. Futures above spot suggests an expected rise — a contango market; futures below spot suggests an expected fall — backwardation.
Options. The spot price of the underlying is the first of the five factors that determine an option's premium. It decides moneyness: a call is in-the-money when spot is above strike, a put when spot is below strike, and intrinsic value is S − X for a call and X − S for a put.
Delta of futures. A stock futures contract has a delta of roughly one, "because the futures price goes hand in hand with the spot price".
The formula
Basis = Spot price − Futures price
Fair futures price = S × (1 + r − q)^T (discrete)
= S × e^((r − q) × T) (continuous)
Call intrinsic value = max(S − X, 0) Put intrinsic value = max(X − S, 0)
A worked example
Break-even futures price from spot — the workbook's ABC example (Chapter 3). ABC trades at Rs 100 in the cash market. You borrow Rs 100 at 6% for a year and expect a dividend of Rs 2 (200% on face value of Rs 1).
Net cost of carry = Interest − Dividend = 6 − 2 = Rs 4
Break-even futures price = 100 + 4 = Rs 104
Fair value of index futures — the workbook's numbers. Spot index 17,500, cost of financing 12%, index yield 4%, 90 days to expiry:
Discrete: 17,500 × (1 + 0.12 − 0.04)^(90/365) = 17,835.26
Continuous: 17,500 × e^((0.12 − 0.04) × 90/365) = 17,848.63
Forward settled against spot. You agreed to buy gold at Rs 62,337 one month forward. On delivery day:
| Spot price | Result per 10 g |
|---|---|
| Rs 62,700 | +Rs 363 |
| Rs 62,100 | −Rs 237 |
A contradiction worth knowing. The workbook says contract value is the futures price × contract multiplier, but then computes the Nifty contract value as 65 × 24,894.25 = Rs 16,18,126.25 — the spot value. On the futures closing price the answer is 65 × 25,006.60 = Rs 16,25,429. Follow the stated rule — futures price — unless a question clearly asks for the underlying value.
Why NISM asks about it
Chapter 3 uses the spot price throughout: section 3.1 (gold example), 3.3 (underlying price in contract specifications), 3.4 (basis and cost of carry), 3.7 (cost of carry model and no-arbitrage), and 3.8 (convergence at expiry). Chapter 4, sections 4.3, 4.4 and 4.7, use it for moneyness, intrinsic value and option pricing. Expect basis sign questions, fair value calculations, and convergence of spot and futures at expiry.
Common exam traps
- Basis = spot − futures. Futures above spot means negative basis, not positive.
- Basis becomes zero at expiry because futures settle at the underlying's closing price.
- Spot and underlying price are the same thing in the workbook's contract specifications; the futures price is different.
- Contract value uses the futures price — note the workbook's own inconsistency above.
- Contango = futures above spot (expected rise); backwardation = futures below spot (expected fall).
- A call is ITM when spot > strike; a put is ITM when spot < strike.
- Final settlement price wording differs between Chapter 3 (closing price of the underlying in the cash segment) and Chapter 7 (last 30 minutes' VWAP of the underlying across exchanges).
Where this is taught
- Series XXI-B · Chapter 5: Derivativesintroduced here
- Series VIII · Chapter 3: Introduction to Forwards and Futuresintroduced here
- Series XXI-A · Chapter 5: Derivativesintroduced here
Related terms
- ConvergenceThe certainty that a futures price and the spot price of its underlying meet at expiry — because on the last trading day the contract settles at the cash market price, leaving no room for a difference.
- Final Settlement PriceThe price at which a commodity derivative is finally settled at expiry — a simple average of the polled spot prices of the expiry day and the two days before it.
- BasisThe difference between the spot price and the futures price of an asset — positive when spot exceeds futures, negative when futures exceeds spot, and zero at expiry.
- Forward contractA bilateral, over-the-counter agreement between two parties to buy or sell an asset on a fixed future date at a price agreed today — customised to suit them, and binding on both.
- MoneynessWhether exercising an option right now would give the buyer a positive, zero or negative cash flow — classifying it as in the money, at the money or out of the money.
- Cost of carryThe cost of holding an asset until a future date — financing interest plus storage, less any income it pays. It links spot to futures: fair futures price = spot + cost of carry − inflows.
- UnderlyingThe asset a derivative contract derives its value from — the index, stock, bond or currency whose spot price drives the contract. The derivative has no value of its own without it.
- No-arbitrage boundsThe band around the fair futures price, created by transaction costs, taxes and margins, within which a mispricing is too small to arbitrage profitably — so prices can sit there undisturbed.
- Carry costThe interest cost built into the gap between a stock's spot price and its futures price, reflecting the cost of funding a spot purchase until the futures contract's delivery date.