Forward Trading Forward Contract

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What’s a forward contract?

Essentially, forward and futures contracts are agreements that allow traders, investors, and commodity producers to speculate on the future price of an asset. These contracts function as a two-party commitment that enables the trading of an instrument on a future date (expiration date), at a price agreed upon at the moment the contract is created.

The underlying financial instrument of a forward or futures contract can be any asset, such as equity, a commodity, a currency, an interest payment or even a bond.

Although primitive forms of futures markets were created in Europe during the 17th century, the Dōjima Rice Exchange (Japan) is regarded as the first futures exchange to be established. In early 18th-century Japan, most payments were made in rice, so futures contracts started to be used as a way to hedge against the risks associated with unstable rice prices.

With the emergence of electronic trading systems, the popularity of forward contracts, along with a range of use-cases, became widespread across the entire financial industry.

How to book trades with HUBFX?

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*Beta only available to merchant clients for now.

What's the difference vs Spot Trades when Booking on HUBFX?

On a Spot Trade, you select the currency you’d like to sell and the currency you’d like to buy, then the next step, is to select a date for the trade. The default trade date is a Spot Trade Date.

If you want to settle the trade for a far date, i.e. a forward trade, you select the date you want on the calendar (instead leaving it as default), confirm the date is the date you want to sell the currency, then click “get a quote”.

This way, you take the advantage of today’s Forward Rate that is just a few points different from the Spot Rate, helping you hedge the risk of the downside of the Rate Movement.

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