We all have heard of trading in the cash market versus trading in the futures market in equities. But did you know that there is a similar distinction with respect to commodities too? You can buy commodities in the spot market as well as the futures market. For example, you can either buy cotton in the spot market and take delivery or you can buy cotton in the futures market and decided before the settlement date whether to take delivery or not. Remember, in the spot market there is no choice because delivery is compulsory. If you have bought cotton in the spot market then you need to have funds to take the delivery of cotton. Similarly, if you have sold cotton then you need to have the cotton inventory available with you to give the delivery.