Forward Transaction

In a forward transaction, two people or other entities engage in a binding agreement to perform a trade in the future, rather than at the present. This difference in the timing of trades sets futures trades apart from spot trades. The assets being traded in the forward transaction make up its underlying assets

Forward transactions provide a means of protecting investments against possible rate fluctuations. They are primarily used for speculative purposes. The buyer in a forward transaction speculates on a rise in the value of the underlying assets. The seller, on the contrary, speculates on a drop in the price of the underlying assets.

In theory, goods of all kinds can make up the underlying assets for futures transactions, including stocks, commodities or more general wares. A difference is made between conditional and unconditional forward transactions.

Where a conditional forward transaction – such as an options transaction – is used, the buyer can choose the timing of the transaction. The buyer can then either carry out the trade at the specified time, or forfeit the trade. While the seller is obliged to perform the trade, this obligation does not apply to the buyer.

In an unconditional forward transaction, both the buyer and the seller are obligated to fulfil the forward transaction agreement. Futures and swaps are examples of unconditional forward transactions traded on the stock market. Forwards are over-the-counter forward transactions.

Example of an unconditional forward transaction: A cocoa farmer hopes to sell his stock of cocoa beans at the highest possible profit. A chocolate producer in Switzerland wants to buy the cocoa beans at the lowest possible cost. On January 1, the farmer and the chocolate factory agree to a purchase volume of 100 kilograms of cocoa beans at a price of 25 francs per 10 kilos. They both agree that delivery and payment will occur on February 15.

Thanks to the forward deal, the farmer has the security of knowing that they have a guaranteed sale of cocoa beans worth 250 francs. The chocolate producer has the security of knowing that the cocoa will be delivered at the agree-upon price exactly 6 weeks after they sign the deal. Any fluctuations in cocoa prices which occur after the agreement is signed are no longer relevant for either party.

More on this topic:
Online trading: Interactive broker comparison

Expert Benjamin Manz
Benjamin Manz is CEO of and an independent expert on banking and finance.
Online trading brokers in comparison

Find the cheapest online broker now

Compare now
Trading platforms

Brokers with low fees

Swiss Broker


  • Swiss online bank

  • No additional exchange charges

  • No transaction fees for Swiss equities

Swiss Broker

Saxo Bank Switzerland

  • Swiss online bank

  • Favorable prices stock trading

  • High account interest rates

Swiss Broker


  • Swiss online bank

  • No custody fees for stocks

  • Free market research and trading signals

Wealth managers in comparison

Find the most favorable wealth management now

Compare now for free
Request now without obligation

Choice of digital asset managers

Robo advisor

True Wealth

  • BLKB as partner and custody bank

  • Flat fee: 0.5% - 0.25%

  • Free test account

Robo Advisor


  • Digital asset manager

  • An offer from the bank CIC

  • Free test account

Digital asset management


  • Digital financial assistant

  • Free investment plan

  • Free test account

Request now without obligation

Swiss wealth managers

Digital Private Banking

volt by Vontobel

  • Access to Vontobel investment experts

  • Individually selectable investment products

  • Information without obligation

Robo advisor

Bank CIC cleverinvest

  • Digital asset manager

  • Flat fee of 0.5%

  • Already from CHF 1000

Online wealth management

PostFinance E-Investment Management

  • Digital wealth management

  • From CHF 5000

  • Direct opening possible