Forward Contract: A Customized OTC Agreement for a Future Trade A forward contract is a private, customized agreement between two parties to buy or sell an asset at a specific future date for a price…
Options Contract: The Right (Not the Obligation) to Buy or Sell an Asset An options contract is a financial agreement that gives the buyer the right—but not the obligation—to buy or sell an asset at…
Futures Contract: An Agreement to Buy or Sell at a Future Date at a Fixed Price A futures contract is a standardized financial agreement to buy or sell an asset at a predetermined price on…
Underlying Asset: The Asset on Which Derivatives are Based An underlying asset is the foundation of a derivative contract. Simply put, it’s the asset whose price movement determines the value of a derivative. If the…
