Legal Definitions - spot month

The spot month refers to the current calendar month in which a specific futures contract is scheduled to conclude, meaning the underlying asset is expected to be delivered or the financial settlement is to occur. It is the month when the obligations of the futures contract become immediate.

• Scenario 1: Agricultural Commodity
  A large food processing company purchased futures contracts for 10,000 bushels of wheat, with the agreement specifying delivery in July. As the calendar turns to July, that month becomes the spot month for those particular contracts.

  Explanation: In this situation, July is the spot month because it is the designated period when the wheat is expected to be physically delivered by the seller to the food processing company, and payment will be made, fulfilling the terms of the futures contract.

• Scenario 2: Energy Futures
  An airline bought crude oil futures contracts several months ago to hedge against rising fuel prices, with the contracts set to expire and require delivery in October. When October arrives, it is considered the spot month for these contracts.

  Explanation: October is the spot month because it is the current month in which the airline expects to take delivery of the crude oil (or receive a cash settlement in lieu of physical delivery, depending on the contract terms), thereby finalizing the futures agreement.

• Scenario 3: Financial Index Futures
  A portfolio manager holds futures contracts tied to a major stock market index, which are scheduled for cash settlement in September. Once September begins, it is designated as the spot month for these financial instruments.

  Explanation: September is the spot month because it is the current month during which the final cash settlement of the index futures contract will occur, based on the index's value at the contract's expiration, completing the transaction without physical delivery of assets.