What is the forward market?

The

Forward market is an over -the -counter method of trading with specialized futures contracts. While the forward market has a lot in common with the Futures exchange, the target and market feeling is much different. In most cases, the forward contracts are individualized to the parties and never sell to other holders. Traders generally sit and develop individual details of the contract rather than using basic agreements. Since the process is often personal and adapted to the parties, it is common for the buyer and the seller to recognize each other. In many cases, these contracts represent the purchase or sale of assets by a certain amount for a specific amount. Once the future has been developed, it can be purchased and sold just like any other asset. Until the future does not expire, the real holder is rarely important.

The goal of the investor in the Futures contract is to predict changes in the market to buy or sell an asset with a useful stock exchange. For example, shares are sold at the time of selling the future for$ 50 (USD). The contract states that within six months the holder has the opportunity to purchase this share for the price of $ 50. The buyer hopes to increase the price of shares and the seller sells the possibility of getting immediate money against the potential loss of future money. If the stock price rises to up to $ 75, the future holder can apply his option and buy shares cheaply for an immediate profit of $ 25.

The

Forward market contract is almost identical to the future from an investment point of view. The only defined difference is in the method sold. The future is sold via the stock exchange, a reserved platform for purchasing and selling assets. They are sold in advance by a shop, which means that they are sold directly to another person. Although it seems to be a smaller difference, in this case it is important.

When replacing futures, contracts are usually standardized forms with information about the completed sales. In the pre -Guard market, the buyer and the seller usually cooperate on the creation of a unique contract that will be beneficial for both parties.Given that the agreement is often more complicated and bilateral than the future, the overdue market rarely leads to failure or expiration. Finally, the contract often stipulates that the attacker does not have to be sold to another party.