ES Friday 10-28-16 : Hot Topic

Forward Contract

Search Dictionary

Definition of 'Forward Contract'

A Forward Contract is essentially the same as a futures contract with the exception that a forward contract is non-standardized while a futures contract is standardized. What this means is that a buyer and seller need to agree to the terms of this customized version of a future when they enter into a forward contract.

The contract is to buy or sell an asset at a specified future time at a price agreed today. Contrast this to a spot contract which is an agreement to buy or sell an asset today.

The party agreeing to buy the underlying asset in the future assumes a long position, and the party agreeing to sell the asset in the future assumes a short position. The price agreed upon is called the delivery price, which is equal to the forward price at the time the contract is entered into.

Do you have a trading or investing definition for our dictionary? Click the Create Definition link to add your own definition. You will earn 150 bonus reputation points for each definition that is accepted.

Is this definition wrong? Let us know by posting to the forum and we will correct it.