AS Chakravarthy NCFM Course in Hyderabad : Forwards and Futures

Stock Market : NCFM Course in Hyderabad : Forwards and Futures

AS Chakravarthy NISM NCFM : Technical Analysis Course in Hyderabad

Forward contracts are often confused with futures contracts. The confusion is primarily because both serve essentially the same economic functions of allocating risk in the presence of future price uncertainty. However futures are a significant improvement over the forward contracts as they eliminate counterpart risk and offer more liquidity. Below Table lists the distinction between the forwards and futures contracts


Futures Forwards
Trade on an organized exchange OTC in nature
Standardized contract terms Customized contract terms
More liquid Less liquid
Requires margin payments No margin payment
Follows daily settlement Settlement happens at end of period


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