• Privacy Policy
  • Refund and Returns Policy
  • Term Conditions
  • My Account
Friday, January 27, 2023
Money Blog
  • Login
  • Register
  • Home
  • Investments
  • Personal Finance
  • Stock Market
Blog
Subscribe
  • Home
  • Investments
  • Personal Finance
  • Stock Market
Money Blog
Home Blog

Forward Contract

A Concise Guide to Forward Contract

by Skills.Money
in Blog, Investing
Reading Time: 3 mins read
A A

A Forward Contract is an over-the-counter agreement between two parties to buy or sell an asset at a particular time in the future for a specific price. The terms-long hedge and short hedge refer to whether a party to a forward contract is a buyer or a seller.

  • The party that has agreed to buy in anticipation of a possible increase in the price of an underlying asset is said to have a long position.
  • The party that has agreed to sell in anticipation of a possible decline in the price of an underlying asset is said to have a short position.

The distinguishing characteristic of a forward contract is that they are not traded on any exchange. They are therefore called “over-the-counter.” Dealers bring together the buyer and the seller, who then negotiate the terms of the contract.

How is a Forward Contact Settled?

Settlement of the forward contract can occur either by cash or by delivery. In addition to the cash payment from the buyer, an agreement made on a delivery basis will require the seller to supply the asset to the buyer on the settlement date. On the other hand, a contract made on a cash basis merely requires a cash settlement between the buyer and seller on the settlement date. The cash settlement amount is based on the difference between the current market price and the agreed contract price. If the market and contract prices are the same on the settlement date, no money changes hands, and the contract is closed.

This is a Premium Content

Login if you have purchased

Membership

Get Access to all the Premium Content.
More than 100+ Articles, Mini Courses, Quizzes and Contests.
Subscribe Now
Previous Post

Gold Trading

Next Post

Alternative Investments

Next Post
Alternative Investments

Alternative Investments

Skills.Money

We Offer Premium Content in Financial Literacy through blogs, interactive micro courses, quizzes. Membership offers access to premium content and chance to win quiz contests.

Site Links

  • Privacy Policy
  • Refund and Returns Policy
  • Term Conditions
  • My Account

Our Social Media

Newsletter

© 2022 Skills.Money A Financial Literacy Initiative.

No Result
View All Result
  • Home
  • Mini Courses
    • Personal Finance
    • Investments
    • Stock Market
  • Blog
    • Economy
    • Insurance
    • Investing
    • Personal Finance
    • Taxation
  • Membership
  • My Account

© 2022 Skills.Money A Financial Literacy Initiative.

Welcome Back!

OR

Login to your account below

Forgotten Password? Sign Up

Create New Account!

Fill the forms bellow to register

All fields are required. Log In

Retrieve your password

Please enter your username or email address to reset your password.

Log In

Add New Playlist

Are you sure want to unlock this post?
Unlock left : 0
Are you sure want to cancel subscription?