Forward Contracts

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WELCOME TO MYFOREXEYE
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What is Forward Contract?
Forward Contracts Meaning Forward contracts are
derivative products, which derives its value from
the underlying assert. It is a non-standardized
contract between two parties to buy and sell an
asset at a specified time at a price agreed upon
by two parties today. In forward contracts there
is an obligation for the buyer and seller to pay
and deliver it on settlement date. The
commodities often traded in the forward contracts
are Agro, metals, natural gas, Currencies and
financial instruments. The party which agrees to
buy an asset in a future date in the forward
contract is known as taking long position and the
party which agrees to sell the asset in the
future date is known as taking short position and
future price which is agreed by the two parties
to entered into the contract is known as delivery
price which is equal to the forward price in the
market at the time parties entered into the
contract.
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Forward contracts are used to hedge risk in
currency or exchange rate risk as a means of
speculation. Forward contracts non exchange
traded and non-standardized assets, with no
interim partial settlements and demand delivery
at the time closing of the contract but by
trading over the counter forward contracts can be
customized according to the parties requirement.
Forward contracts are usually traded through
financial institutions like banks and usually
companies open trading accounts and maintain
limits with the banks so at the time of certain
trigger events it can adjust the mark to market
value. The value of long or short positions in
the forward contract depends upon the delivery
price and the spot price of the underlying asset
at the time of entering the contract. Long
position payoff Spot price delivery
price Short position payoff Delivery price Spot
price In highly traded commodities like
currencies the spot and forward margins are
determined by several global factors.
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CONTACT US
Myforexeye Fintech Pvt. Ltd. Plot 135, Pocket
1 Jasola Vihar New Delhi 110025
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