AWS Spot Instance is a purchasing option that allows a customer to purchase unused Amazon EC2 computer capacity at a highly-reduced rate.
Spot Instances provide Amazon with a flexible way to sell extra capacity. The instances are acquired through a bidding process in which the customer specifies a price per hour he is willing to pay.
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When an EC2 instance becomes available at that price, the customer's instance will run. The instance will be cut off when the Spot price increases and exceeds the customer's bid. As long as the customer doesn't cancel his bid, the instance will be reactivated when the price falls again. Instances may also be terminated when the customer's bid price equals the market price. This can happen when demand for capacity rises or when supply fluctuates.
According to Amazon, Spot Instance prices are typically more than 75% lower than On Demand prices. A common use for AWS spot instances is high-performance computing (HPC), in which firms that are performing financial or scientific analysis spin up hundreds or thousands of machines for a short time. Spot Instances are not well-suited for real-time or mission-critical services such as Web applications.