Forward Contracts vs. Futures Contracts: Which Should You Choose?

You may be surprised to know that the concepts of forward and futures contracts, popularized by the stock market in modern times,  have been around since ancient Greece. As the crypto market continues to grow and garner mainstream acceptance, these derivatives have come to play a key role in its growth. Perhaps one of the best indicators that an industry is growing is the introduction of tradable derivatives that aid in price discovery. To this end, let’s discuss what forward and futures contracts are, and which option is more suitable for you.

What Are Forward Contracts?

Forward contracts are agreements between two parties to buy or sell a specific quantity of a product based on a set of predetermined terms, where payment and delivery of the product are completed later at a set date. The terms of each contract are negotiated by the individual parties involved. Since a forward contract is concluded outside of exchange trading, it’s often referred to as an OTC (Over The Counter) transaction.