What is the Cash Price?
Also called theor the current price, a cash price is the current price of a if it were to be sold or purchased today.
How Does the Cash Price Work?
For example, if you purchase a cup of coffee in a restaurant, you pay the cash price -- the price of the good for immediate delivery.
Why Does the Cash Price Matter?
There is an important link between cash prices and futures prices for commodities, and the difference between the two -- that is, the difference between the price of coffee now and the price for delivery of coffee in, say, three months -- is called the . This time spread can be an economically important variable because it indicates the expectations about futures prices. For example, if people believe that coffee sell for $40 a pound in three months, the price of a for delivery of coffee in three months cannot be $100; it be more like $40, though the price for storing the coffee helps determine the relationships between futures prices and cash prices. In any case, futures prices for a given commodity generally converge toward the cash price as the delivery month of the futures contract approaches.