Forward Spread

A A A

DEFINITION

The price difference between the spot price of a security and the forward price of the same security taken at a specified interval. The forward spread is usually calculated using the forward price one month after the spot price. An at par forward spread is found when the spot price and the forward price are the same.

INVESTOPEDIA EXPLAINS

For example: The spot price of the security is 1.02. The forward price, taken one month later, is 1.07. Therefore, the forward spread is 0.05, or 5 basis points.


RELATED TERMS
  1. Basis Point - BPS

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a ...
  2. Forward Rate

    A rate applicable to a financial transaction that will take place in the future. ...
  3. Bull Spread

    An option strategy in which maximum profit is attained if the underlying security ...
  4. Security

    A financial instrument that represents: an ownership position in a publicly-traded ...
  5. Stock

    A type of security that signifies ownership in a corporation and represents ...
  6. Spot Price

    The current price at which a particular security can be bought or sold at a ...
  7. Spread

    1. The difference between the bid and the ask price of a security or asset. ...
  8. At Par

    A term that refers to a bond, preferred stock or other debt obligation that ...
  9. Cash-And-Carry Trade

    A trading strategy in which an investor buys a long position in a security or ...
  10. ISDA Master Agreement

    A standard agreement used in over-the-counter derivatives transactions.
Related Articles
  1. An Introduction To Gamma-Delta Neutral ...
    Options & Futures

    An Introduction To Gamma-Delta Neutral ...

  2. Contango Vs. Normal Backwardation
    Options & Futures

    Contango Vs. Normal Backwardation

  3. Out-Of-The-Money Put Time Spreads
    Options & Futures

    Out-Of-The-Money Put Time Spreads

  4. Vertical Bull and Bear Credit Spreads
    Options & Futures

    Vertical Bull and Bear Credit Spreads

  5. Trading The QQQQ With In-The-Money Put ...
    Options & Futures

    Trading The QQQQ With In-The-Money Put ...

  6. Why do futures' prices converge upon ...
    Trading Strategies

    Why do futures' prices converge upon ...

  7. Curious About Stock Index Futures? Read ...
    Options & Futures

    Curious About Stock Index Futures? Read ...

  8. How to Trade Futures Contracts
    Options & Futures

    How to Trade Futures Contracts

  9. What's the best way to play backwardation ...
    Active Trading Fundamentals

    What's the best way to play backwardation ...

  10. The Role Of Speculators In The Commodity ...
    Investing Basics

    The Role Of Speculators In The Commodity ...

comments powered by Disqus
Hot Definitions
  1. Ascending Triangle

    A bullish chart pattern used in technical analysis that is easily recognizable by the distinct shape created by two trendlines. In an ascending triangle, one trendline is drawn horizontally at a level that has historically prevented the price from heading higher, while the second trendline connects a series of increasing troughs.
  2. National Best Bid and Offer - NBBO

    A term applying to the SEC requirement that brokers must guarantee customers the best available ask price when they buy securities and the best available bid price when they sell securities.
  3. Maintenance Margin

    The minimum amount of equity that must be maintained in a margin account. In the context of the NYSE and FINRA, after an investor has bought securities on margin, the minimum required level of margin is 25% of the total market value of the securities in the margin account.
  4. Leased Bank Guarantee

    A bank guarantee that is leased to a third party for a specific fee. The issuing bank will conduct due diligence on the creditworthiness of the customer looking to secure a bank guarantee, then lease a guarantee to that customer for a set amount of money and over a set period of time, typically less than two years.
  5. Degree Of Financial Leverage - DFL

    A ratio that measures the sensitivity of a company’s earnings per share (EPS) to fluctuations in its operating income, as a result of changes in its capital structure. Degree of Financial Leverage (DFL) measures the percentage change in EPS for a unit change in earnings before interest and taxes (EBIT).
  6. Jeff Bezos

    Self-made billionaire Jeff Bezos is famous for founding online retail giant Amazon.com.
Trading Center