Forwards

A contract in which the price of a commodity is decided upon before the delivery date.  Commonly used to “lock-in” prices.  These contracts differ from futures contracts in that they are not exchange traded and are not standardized.  In addition, losses normally accrue over the entire length of the contract instead of being adjusted daily like futures. The main advantage to forwards is their ability to be customized for the two parties as they are traded “over the counter”.  Forwards involve future physical delivery of an asset at agree-upon price.