Trader's Glossary

Forward

Forwards are private agreements where a buyer and a seller settle on a price for a given asset, but defer delivery until an agreed-upon later date. This may be days, weeks, months or even years in the future. When the contract matures the buyer is obliged to buy and the seller is obliged to sell at the price secured in the contract, irrespective of the present market conditions. Forwards are often used by farmers to guarantee that they will receive a set price for their crops before they are harvested, thus hedging against uncertainty in future market price.