An option or forward contract that involves the sale or purchase of a currency or commodity at a given price on a specific future date, so as to a hedge against unfavorable exchange rate fluctuations. In other words, this hedging tool involves the purchase in the cash market of the difference between the value of an asset a trader (the short in a forward contract) is obligated to deliver in the future and the value of what he has at hand. For instance, if a trader has entered into a forward contract whereby agreeing to sell 200,000 ounces of copper in April, while he has only 80,000 ounces at hand (i.e. he is long that much), a forward cover would be required, where the trader enters, now, into an April-delivery long forward contract to the tune of 120,000 ounces.
Derivatives
[related_posts_by_tax title="See also" posts_per_page="10" taxonomies="post_tag"]
[pt_view id=78ecc7bubm]
[su_box title="Watch on Youtube" style="soft" box_color="#f5f5f5" title_color="#282828" radius="2" class="" id=""][su_row class=""][su_column size="1/1" center="yes" class=""] 
[/su_column][/su_row][/su_box]
[/su_column][/su_row][/su_box]
Comments