1 AJay_Mishra Asked: June 27, 2019In: Commerce Distinguish between Forward contarcts and Currency options 1 Export Procedures and Documentation 1 Answer Voted Oldest Recent admin Added an answer on June 27, 2019 at 2:44 pm Forward contracts are binding agreements to buy or sell an asset at a specific price on a specific date. For example, two parties may agree to trade 1,000 ounces of gold at $1,200 per ounce on Sept. 1. One party to such an agreement will have an obligation to buy, and the other will have an obligation to sell. Such contracts can involve practically anything of value, including stocks, bonds, foreign currencies, agricultural commodities such as corn or soybeans, and valuable metals, including gold and silver. The asset that changes hands is referred to as the underlying asset, or simply “the underlying.” Forwards are traded over the counter. A currency option gives the holder the right-but not the obligation — to buy or sell an asset at a specific price on a specific date. A curreny option represents the right to buy, while a put option represents the right to sell. A currency option on 1,000 shares with a strike price of $100 and an expiration date of Aug. 27 allows the option holder to buy 1,000 shares at $100 each on Aug. 27. If the market price of the stock is $110 per share, it makes sense to exercise this privilege, because you can then sell the same shares at $110 for an immediate profit. If the stock can otherwise be purchased for $90, however, the holder would not exercise the call — hence the name currency “option.” 1 Reply Share Share Share on Facebook Share on Twitter Share on LinkedIn Share on WhatsApp Leave an answerLeave an answerCancel reply Featured image Select file Browse Save my name, email, and website in this browser for the next time I comment.