Commodity forwards
A 'forward' is a contract agreed between two parties whereby one agrees to deliver a specific quantity of an asset – say one ton of aluminium – on an agreed date and the other agrees to pay a fixed price for it on that date...
A 'forward' is a contract agreed between two parties whereby one agrees to deliver a specific quantity of an asset say one ton of aluminium on an agreed date and the other agrees to pay a fixed price for it on that date. The buyer of a forward might be a manufacturer worried about the market price of aluminium rising and the seller might be a producer worried about the opposite.
By locking in a price for 'forward delivery', both solve their respective price worries. What's more, the buyer ensures they can actually get hold of aluminium on the delivery date, should there be a shortage, or they can sue the seller for non-delivery. Forwards can be standardised and traded on commodities exchanges too. Usually they are then called futures contracts.
See Tim Bennett's video tutorial: What are futures?
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
-
Hargreaves Lansdown bumps up cash ISA with £25 cashback - does it beat the wider ISA market?
Just days before the end of the tax year, Hargreaves Lansdown has launched a £25 bonus for those who open a cash ISA on its savings platform. Does the bonus make it a competitive rate, and are you eligible for the cashback?
By Vaishali Varu Published
-
FCA targets finfluencers with new social media guidance
So-called finfluencers have been warned by the UK financial watchdog that they could face prosecution if they fail to follow new rules.
By Henry Sandercock Published