What is Forward Trading and how it differ from Future Trading?

One is exchange traded

1 Answer(s)


A forward contract is an agreement between two parties to buy or sell an asset at a pre-agreed future point in time at a specified price.

It is negotiated directly by the buyer and seller and is not regulated.

No guarantee of settlement until the date of maturity only the forward price, based on the spot price of the underlying asset is paid. Forward contracts generally mature by delivering the commodity.

A futures contract is a standardized contract, traded on a futures exchange, to buy or sell a certain underlying instrument at a certain date in the future, at a specified price.

It is quoted and traded on the Exchange and is regulated by CFTC.
Both parties must deposit an initial margin. The value of the operation is marked to market rates with daily settlement of profits and losses. Future contracts may not necessarily mature by delivery of commodity.