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  1. Home
  2. /Glossary
  3. /Spot Premium
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trading

Spot Premium

The difference between a derivative's price and the underlying asset's spot price.

Definition

The difference between a derivative's price and the underlying asset's spot price. When Bitcoin futures trade above spot, there's a positive premium (contango). When below spot, it's a negative premium (backwardation). Premium levels indicate market sentiment and leverage demand.

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Related Terms

Futures

Contracts to buy or sell an asset at a specific price on a future date.

Spot Trading

Buying and selling assets for immediate delivery at current market prices.

Funding Rate

A periodic payment between long and short traders in perpetual futures markets that keeps the contract price close to spot price.

Accumulation Phase

A period when smart money quietly buys up an asset before a major price move.

Annualized Return

The average yearly return on an investment, calculated to account for compounding.

Arbitrage

Profiting from price differences of the same asset across different markets.

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