Forward Contract

A forward contract is an agreement between two parties to buy or sell underlying assets at specified date, at agreed rate in future.

Why Use Forward Contract

Hedging

Hedgers can enter into forward contracts to stabilize revenues or costs of their operations. Instead of seeking profit, gains are used to offset losses in the market for an underlying asset.

Speculation

Speculators try to maximize their profits by "betting" on which way the prices will go. They aren't interested in buying or selling the underlying asset. Instead, they hope to profit on the forward contract itself by "betting" on the direction the price will go.

Benefit for Buyer& Sellers

Seller

For sellers, forward contracts enable them to project cash flow by understanding the value of a future asset when the forward contract is struck. Forward contracts obligate buyers to take possession of the assets upon the delivery date, so sellers also have certainty about who they are delivering their assets to (and by when). They can use this information for planning and management their risk exposure.

Buyer

For buyers, forwards lock in prices, enabling them to predict and control variable costs of NFT. They can hedge against volatility in the marketplace by locking in the price using a forward contract.