Spot Rate: Definition, How it Works, Examples

July 2, 20236 min read
Spot Rate: Definition, How it Works, Examples
Share on facebookShare on TwitterShare on Linkedin

Key Takeaways

  • Spot rate is the price quoted for immediate settlement on a commodity, security, interest rate, or security.
  • The obverse of spot rate is the forward rate, which is an agreed-upon price for an asset’s future delivery.
  • The spot rate can reliably indicate the relative value of various currencies and plays a crucial role in facilitating investment and trade. 

There are different types of participants in financial markets. While some investors seek future delivery of shares, others prefer the immediate settlement of securities. The latter – the instant delivery of securities — occurs in the spot market. But just what is “spot rate?” Here is the definition, how it works, and examples. 

What is a Spot Rate?

In investing, “spot rate” is basically an asset’s market value at the moment it is quoted. In other words, it is the price quoted for immediate settlement  and delivery on a commodity, security, interest rate, or security.

For an asset available for immediate delivery, the spot rate mirrors real-time market supply and demand. Rates are fluid and change constantly as market conditions fluctuate.

Spot rate also refers to the exchange rate – at the present moment – between two currencies, with immediate settlement and delivery. 

What are Some Factors That Influence Spot Rate?

A spot rate’s value is based in part on the amount that purchasers will pay and the amount that sellers are willing to take, which typically hinges on a variety of factors including supply and demand, current and expected future market value, in addition to factors that can affect the entire market: interest rates, geopolitical events such as wars, and overall market sentiment.

Spot Rate vs. Forward Rates

The obverse of spot rate is the forward rate, also called the futures price, which is an agreed-upon price for an asset’s future delivery.

With spot rate, market occurrences between the transaction’s initiation date and the transfer of funds notwithstanding, the transaction consummates at the agreed upon price.

In fact, the spot rate is employed to determine the forward rate – a future financial transaction price – since an asset’s expected future value depends partly on its current value as well as its risk-free rate and time until maturity. That means that traders can infer an unknown spot rate if they know the future’s price, when the contract matures, and the risk-free rate.

Ultimately, forward rates allow investors and businesses to hedge against currency risk and plot future cash flows. Comparing the spot and forward rates allow market participants to evaluate market expectations concerning future currencies movements and strategize accordingly.

Spot Rate Examples

Here is an example of how spot prices and forward contracts are employed in market transactions. Say that it is September and a wholesaler must make a delivery of fruit. To ensure delivery within two business days, the wholesaler will pay their seller the spot price.

The wholesaler needs the fruit in stores by late January, but also believes that by then the price will increase due to wintertime demand and diminished supply.  In this scenario, a forward contract would make more sense since the fruit is not required right away, and a spot purchase would risk fruit spoilage.

In another example, note that share spot prices are the current value of a company’s market share. For instance, if Apple is trading at $185 per share, that is the share’s spot price. So, in a share spot price example, if an investor seeks 10 shares of Apple at the spot price, they need $1,850 to cover it. After buying the shares, they can sell them at a future date, hopefully at a profit if the share price rose.

In a foreign exchange spot price example, say the spot price of USD/JPY is 143.70, which means it would take 143.70 Japanese yen to buy a U.S. dollar.

A trader takes a short position on the spot price of the pair, believing its value will soon fall.  This is done using what is called a contract for difference (CFD), opening a position to “sell” 1,000 USD/JPY contracts at a price of 10 cents per movement point. If, as anticipated, the price did drop to, say, 143.50, those 20 points of movement would garner some $2,000 (20×0.1×1000).

Why are Spot Rates So Important?

The spot rate can reliably indicate the relative value of various currencies and plays a crucial role in facilitating investment and trade. 

Understanding the concept of spot rate is essential for investors as well as companies that engage in foreign exchanges. Such knowledge can be used to make informed decisions and accurately gauge the value of their assets as well as liabilities.

Monitoring Spot Rates

The spot rate is closely tracked by financial institutions, central banks, and investors globally, since beyond exchange rates, the spot rate affects varying aspects of investment, global trade, and financial decision making.

There are various ways to keep track of the global market and stay atop spot rates, including through the use of currency converters and currency exchange websites. There are some 60 primary global stock exchanges that vary in size and trading volume.

Rise above Volatility

Diversify beyond the stock market with Yieldstreet.

Spot Rates and Investments

Investors who seek to diversify their portfolio can benefit from understanding spot rate’s impact on the U.S. economy overall.  After all, spot rate provides actual market movements, and the study of such rates for a certain period can help when analyzing market trends.

And diversification is essential to successful investing. Spreading capital across varied asset classes helps to mitigate risk and guard against inflation.

Alternative investments can be a good way to help accomplish this. Traditional portfolio asset allocation envisages a 60% public stock and 40% fixed income allocation. However, a more balanced 60/20/20 or 50/30/20 split, incorporating alternative assets, may make a portfolio less sensitive to public market short-term swings. 

Real estate, private equity, venture capital, digital assets, precious metals and collectibles are among the asset classes deemed “alternative investments.” Broadly speaking, such investments tend to be less connected to public equity, and thus offer potential for diversification. Of course, like traditional investments, it is important to remember that alternatives also entail a degree of risk. 

In some cases, this risk can be greater than that of traditional investments.

This is why these asset classes were traditionally accessible only to an exclusive base of wealthy individuals and institutional investors buying in at very high minimums — often between $500,000 and $1 million.  These people were considered to be more capable of weathering losses of that magnitude, should the investments underperform.

However, Yieldstreet has opened a number of carefully curated alternative investment strategies to all investors. While the risk is still there, the company offers help in capitalizing on areas such as real estate, legal finance, art finance and structured notes — as well as a wide range of other unique alternative investments. 

Moreover, investors can get started with a relatively small amount of capital. Yieldstreet has opportunities across a broad range of asset classes, offering a variety of yields and durations, with minimum investments as low as $5000.

Learn more about the ways Yieldstreet can help diversify and grow portfolios.


Spot rates essentially reflect the market supply and demand for a particular asset, in that it is a security’s price as quoted by traders. Such rates constantly fluctuate with market changes, so understanding when to take advantage of them is key.

Spot rate can also be used to determine a security’s forward price and can help with portfolio diversification.

We believe our 10 alternative asset classes, track record across 470+ investments, third party reviews, and history of innovation makes Yieldstreet “The leading platform for private market investing,” as compared to other private market investment platforms.

1 Past performance is no guarantee of future results. Any historical returns, expected returns, or probability projections may not reflect actual future performance. All securities involve risk and may result in significant losses.

3 "Annual interest," "Annualized Return" or "Target Returns" represents a projected annual target rate of interest or annualized target return, and not returns or interest actually obtained by fund investors. “Term" represents the estimated term of the investment; the term of the fund is generally at the discretion of the fund’s manager, and may exceed the estimated term by a significant amount of time. Unless otherwise specified on the fund's offering page, target interest or returns are based on an analysis performed by Yieldstreet of the potential inflows and outflows related to the transactions in which the strategy or fund has engaged and/or is anticipated to engage in over the estimated term of the fund. There is no guarantee that targeted interest or returns will be realized or achieved or that an investment will be successful. Actual performance may deviate from these expectations materially, including due to market or economic factors, portfolio management decisions, modelling error, or other reasons.

4 Reflects the annualized distribution rate that is calculated by taking the most recent quarterly distribution approved by the Fund's Board of Directors and dividing it by prior quarter-end NAV and annualizing it. The Fund’s distribution may exceed its earnings. Therefore, a portion of the Fund’s distribution may be a return of the money you originally invested and represent a return of capital to you for tax purposes.

5 Represents the sum of the interest accrued in the statement period plus the interest paid in the statement period.

6 The internal rate of return ("IRR") represents an average net realized IRR with respect to all matured investments, excluding our Short Term Notes program, weighted by the investment size of each individual investment, made by private investment vehicles managed by YieldStreet Management, LLC from July 1, 2015 through and including July 18th, 2022, after deduction of management fees and all other expenses charged to investments.

7 Investors should carefully consider the investment objectives, risks, charges and expenses of the Yieldstreet Alternative Income Fund before investing. The prospectus for the Yieldstreet Alternative Income Fund contains this and other information about the Fund and can be obtained by emailing [email protected] or by referring to The prospectus should be read carefully before investing in the Fund. Investments in the Fund are not bank deposits (and thus not insured by the FDIC or by any other federal governmental agency) and are not guaranteed by Yieldstreet or any other party.

8 This tool is for informational purposes only. You should not construe any information provided here as investment advice or a recommendation, endorsement or solicitation to buy any securities offered on Yieldstreet. Yieldstreet is not a fiduciary by virtue of any person's use of or access to this tool. The information provided here is of a general nature and does not address the circumstances of any particular individual or entity. You alone assume the sole responsibility of evaluating the merits and risks associated with the use of this information before making any decisions based on such information.

9 Statistics as of the most recent month end.

300 Park Avenue 15th Floor, New York, NY 10022


No communication by YieldStreet Inc. or any of its affiliates (collectively, “Yieldstreet™”), through this website or any other medium, should be construed or is intended to be a recommendation to purchase, sell or hold any security or otherwise to be investment, tax, financial, accounting, legal, regulatory or compliance advice, except for specific investment advice that may be provided by YieldStreet Management, LLC pursuant to a written advisory agreement between such entity and the recipient. Nothing on this website is intended as an offer to extend credit, an offer to purchase or sell securities or a solicitation of any securities transaction.

Any financial projections or returns shown on the website are estimated predictions of performance only, are hypothetical, are not based on actual investment results and are not guarantees of future results. Estimated projections do not represent or guarantee the actual results of any transaction, and no representation is made that any transaction will, or is likely to, achieve results or profits similar to those shown. In addition, other financial metrics and calculations shown on the website (including amounts of principal and interest repaid) have not been independently verified or audited and may differ from the actual financial metrics and calculations for any investment, which are contained in the investors’ portfolios. Any investment information contained herein has been secured from sources that Yieldstreet believes are reliable, but we make no representations or warranties as to the accuracy of such information and accept no liability therefore.

Private placement investments are NOT bank deposits (and thus NOT insured by the FDIC or by any other federal governmental agency), are NOT guaranteed by Yieldstreet or any other party, and MAY lose value. Neither the Securities and Exchange Commission nor any federal or state securities commission or regulatory authority has recommended or approved any investment or the accuracy or completeness of any of the information or materials provided by or through the website. Investors must be able to afford the loss of their entire investment.

Investments in private placements are speculative and involve a high degree of risk and those investors who cannot afford to lose their entire investment should not invest. Additionally, investors may receive illiquid and/or restricted securities that may be subject to holding period requirements and/or liquidity concerns. Investments in private placements are highly illiquid and those investors who cannot hold an investment for the long term (at least 5-7 years) should not invest.

Alternative investments should only be part of your overall investment portfolio. Further, the alternative investment portion of your portfolio should include a balanced portfolio of different alternative investments.

Articles or information from third-party media outside of this domain may discuss Yieldstreet or relate to information contained herein, but Yieldstreet does not approve and is not responsible for such content. Hyperlinks to third-party sites, or reproduction of third-party articles, do not constitute an approval or endorsement by Yieldstreet of the linked or reproduced content.

Investing in securities (the "Securities") listed on Yieldstreet™ pose risks, including but not limited to credit risk, interest rate risk, and the risk of losing some or all of the money you invest. Before investing you should: (1) conduct your own investigation and analysis; (2) carefully consider the investment and all related charges, expenses, uncertainties and risks, including all uncertainties and risks described in offering materials; and (3) consult with your own investment, tax, financial and legal advisors. Such Securities are only suitable for accredited investors who understand and are willing and able to accept the high risks associated with private investments.

Investing in private placements requires long-term commitments, the ability to afford to lose the entire investment, and low liquidity needs. This website provides preliminary and general information about the Securities and is intended for initial reference purposes only. It does not summarize or compile all the applicable information. This website does not constitute an offer to sell or buy any securities. No offer or sale of any Securities will occur without the delivery of confidential offering materials and related documents. This information contained herein is qualified by and subject to more detailed information in the applicable offering materials. Yieldstreet™ is not registered as a broker-dealer. Yieldstreet™ does not make any representation or warranty to any prospective investor regarding the legality of an investment in any Yieldstreet Securities.

YieldStreet Inc. is the direct owner of Yieldstreet Management, LLC, which is an SEC-registered investment adviser that manages the Yieldstreet funds and provides investment advice to the Yieldstreet funds, and in certain cases, to retail investors. RealCadre LLC is also indirectly owned by Yieldstreet Inc. RealCadre LLC is a broker-dealer registered with the Securities and Exchange Commission (“SEC”) and a member of the Financial Industry Regulatory Authority (“FINRA”) and the Securities Investor Protection Corporation (“SIPC”). Information on all FINRA registered broker-dealers can be found on FINRA’s BrokerCheck. Despite its affiliation with Yieldstreet Management, LLC, RealCadre LLC has no role in the investment advisory services received by YieldStreet clients or the management or distribution of the Yieldstreet funds or other securities offered on our through Yieldstreet and its personnel. RealCadre LLC does not solicit, sell, recommend, or place interests in the Yieldstreet funds.

Yieldstreet is not a bank. Certain services are offered through Synapse Financial Technologies, Inc. and its affiliates (collectively, “Synapse”) as well as certain third-party financial services partners. Synapse is not a bank and is not affiliated with Yieldstreet. Bank accounts are established by Evolve Bank & Trust. Brokerage accounts and cash management programs are provided through Synapse Brokerage LLC (“Synapse Brokerage”), an SEC-registered broker-dealer and member of FINRA and SIPC. Additional information about Synapse Brokerage can be found on FINRA’s BrokerCheck. By participating in a Synapse cash management program, you acknowledge receipt of and accept Synapse’s Terms of Service, Privacy Policy, and the applicable disclosures and agreements available in Synapse’s Disclosure Library.

Investment advisory services are only provided to clients of YieldStreet Management, LLC, an investment advisor registered with the Securities and Exchange Commission, pursuant to a written advisory agreement.

Our site uses a third party service to match browser cookies to your mailing address. We then use another company to send special offers through the mail on our behalf. Our company never receives or stores any of this information and our third parties do not provide or sell this information to any other company or service.

Read full disclosure