What Is a Forward Contract?
A forward does not predict anything; it fixes a number both sides can plan around.
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1.What does a forward contract fix today?
A forward does not predict anything; it fixes a number both sides can plan around.
2.10 tons of wheat at 300 per ton. What is the total?
Both know today exactly what the deal will cost and bring in.
3.On delivery day wheat costs 360 per ton. How much better off is the baker?
3,600 minus 3,000 is the gap between the market and the deal.
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Education only. Not financial advice.