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Forward trade

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Definition of Forward trade

Forward Trade Image 1

Forward trade

A transaction in which the settlement will occur on a specified date in the future at a price
agreed upon the trade date.



Related Terms:

Balance of Merchandise Trade

The difference between exports and imports of goods.


Balance of trade

Net flow of goods (exports minus imports) between countries.


Balance of Trade

See balance of merchandise trade.


Basket trades

Related: Program trades.


Block trade

A large trading order, defined on the New York Stock Exchange as an order that consists of
10,000 shares of a given stock or a total market value of $200,000 or more.



Counter trade

The exchange of goods for other goods rather than for cash; barter.


Feedforward

The process of determining prospectively whether strategies are likely to achieve the target
results that are consistent with organizational goals.


Forward Trade Image 2

Flat trades

1) A bond in default trades flat; that is, the price quoted covers both principal and unpaid,
accrued interest.
2) Any security that trades without accrued interest or at a price that includes accrued
interest is said to trade flat.


Floor trader

A member who generally trades only for his own account, for an account controlled by him or
who has such a trade made for him. Also referred to as a "local".


Forward buying

The purchase of items exceeding the quantity levels indicated
by current manufacturing requirements.


Forward contract

A cash market transaction in which delivery of the commodity is deferred until after the
contract has been made. It is not standardized and is not traded on organized exchanges. Although the
delivery is made in the future, the price is determined at the initial trade date.


forward contract

Agreement to buy or sell an asset in the future at an agreed price.


Forward cover

Purchase or sale of forward foreign currency in order to offset a known future cash flow.


Forward delivery

A transaction in which the settlement will occur on a specified date in the future at a price
agreed upon on the trade date.


Forward differential

Annualized percentage difference between spot and forward rates.


Forward discount

A currency trades at a forward discount when its forward price is lower than its spot price.


Forward Trade Image 3

Forward Exchange Market

A market in which foreign exchange can be bought or sold for delivery (and payment) at some specified future date but at a price agreed upon now.


Forward exchange rate

Exchange rate fixed today for exchanging currency at some future date.



Forward Fed funds

Fed funds traded for future delivery.


Forward forward contract

In Eurocurrencies, a contract under which a deposit of fixed maturity is agreed to
at a fixed price for future delivery.


Forward interest rate

Interest rate fixed today on a loan to be made at some future date.


Forward looking multiple

A truncated expression for a P/E ratio that is based on forward (expected)
earnings rather than on trailing earnings.


Forward market

A market in which participants agree to trade some commodity, security, or foreign
exchange at a fixed price for future delivery.


Forward premium

A currency trades at a forward premium when its forward price is higher than its spot price.


Forward rate

A projection of future interest rates calculated from either the spot rates or the yield curve.


Forward rate

The future interest rate of a bond inferred from the term
structure, especially from the yield curve of zero-coupon bonds, calculated from
the growth factor of an investment in a zero held until maturity.


Forward rate agreement (FRA)

Agreement to borrow or lend at a specified future date at an interest rate
that is fixed today.


forward rate of exchange

Exchange rate for a forward transaction.



Forward sale

A method for hedging price risk which involves an agreement between a lender and an investor
to sell particular kinds of loans at a specified price and future time.


Free Trade

The absence of any government restrictions, such as tariffs or quotas, on imports or exports.


Information-motivated trades

trades in which an investor believes he or she possesses pertinent
information not currently reflected in the stock's price.


Informationless trades

trades that are the result of either a reallocation of wealth or an implementation of an
investment strategy that only utilizes existing information.


Loss carryforward

The offsetting of a current year loss against the reported taxable
income for future years.


North American Free Trade Agreement (NAFTA)

an agreement among Canada, Mexico, and the United States establishing the North American Free trade Zone, with a resulting reduction in trade barriers


Posttrade benchmarks

Prices after the decision to trade.


Pre-trade benchmarks

Prices occurring before or at the decision to trade.


Program trades

Also called basket trades, orders requiring the execution of trades in a large number of
different stocks at as near the same time as possible. Related: block trade


Publicly traded assets

Assets that can be traded in a public market, such as the stock market.


Range forward

A forward exchange rate contract that places upper and lower bounds on the cost of foreign exchange.


Registered trader

A member of the exchange who executes frequent trades for his or her own account.


Reversing trade

Entering the opposite side of a currently held futures position to close out the position.


Spot trade

The purchase and sale of a foreign currency, commodity, or other item for immediate delivery.


Terms of trade

The weighted average of a nation's export prices relative to its import prices.


Terms of Trade

The quantity of imports that can be obtained for a unit of exports, measured by the ratio of an export price index to an import price index.


Thinly traded

Infrequently traded.


Trade

A verbal (or electronic) transaction involving one party buying a security from another party. Once a
trade is consummated, it is considered "done" or final. Settlement occurs 1-5 business days later.


Trade acceptance

Written demand that has been accepted by an industrial company to pay a given sum at a future date.
Related: banker's acceptance.


Trade credit

Credit granted by a firm to another firm for the purchase of goods or services.


Trade date

In an interest rate swap, the date that the counterparties commit to the swap. Also, the date on
which a trade occurs. trades generally settle (are paid for) 1-5 business days after a trade date. With stocks,
settlement is generally 3 business days after the trade.


Trade debt

Accounts payable.


Trade Deficit

Deficit on the balance of merchandise trade.


Trade draft

A draft addressed to a commercial enterprise. See:draft.


Trade house

A firm which deals in actual commodities.


Trade Loading

A term used for channel stuffing in the domestic tobacco industry.


trade-off theory

Debt levels are chosen to balance interest tax shields against the costs of financial distress.


Trade on top of

trade at a narrow or no spread in basis points relative to some other bond yield, usually
Treasury bonds.


Traders

Persons who take positions in securities and their derivatives with the objective of making profits.
traders can make markets by trading the flow. When they do that, their objective is to earn the bid/ask spread.
traders can also be of the sort who take proprietary positions whereby they seek to profit from the directional
movement of prices or spread positions.


Uptick trade

Related:Tick-test rules


World Trade Organization (WTO)

the arbiter of global trade that was created in 1995 under the General Agreement on Tariffs and trade; each signatory country has one
vote in trade disputes


Value date

In the market for Eurodollar deposits and foreign exchange, value date refers to the delivery date
of funds traded. Normally it is on spot transactions two days after a transaction is agreed upon and the future
date in the case of a forward foreign exchange trade.



 

 

 

 

 

 

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