1. contract period
The difference between futures and forwards lies in the contract term. The term of futures contracts is generally short, generally within one month, while the term of forward contracts is relatively long, generally more than one year.
2. Trading method
Futures and forwards are also traded in different ways. Futures trading is conducted on exchanges, while forward trading is conducted between banks or other financial institutions.
3. Transaction object
The object of futures trading is futures exchange, while the object of forward trading is banks or other financial institutions.
4. Transaction costs
The cost of futures trading is relatively low, while the cost of forward trading is relatively high, because the risk of forward trading is greater.
5. Foreign exchange transaction risk
The risk of futures trading is relatively low, because the term of futures trading is relatively short, while the risk of forward trading is relatively high, because the term of forward trading is relatively long.
6. Transaction flexibility
The flexibility of futures trading is relatively high, because the term of futures trading is relatively short, while the flexibility of forward trading is relatively low, because the term of forward trading is relatively long.
Second, the advantages of futures and forwards.
Futures and forwards are important financial instruments in the financial market, and both have their own advantages.
1. Advantages of futures
The advantages of futures are:
-The futures trading cycle is relatively short, and the investment target can be achieved faster;
-Futures trading costs are relatively low, which can save investment costs;
-Futures trading risks are relatively low, and investment risks can be better controlled;
-Futures trading is more flexible and can better cope with market changes.
2. Long-term advantages
The long-term advantages are:
-Long-term trading can better achieve investment objectives;
-Forward transaction costs are relatively high, which can better control investment risks;
-Forward trading is less flexible and can better cope with market changes.
Third, the applicable scenarios of futures and forwards.
Futures and forwards are both important financial instruments in the financial market, and they all have their own applicable scenarios.
1. Applicable scenarios of futures
The applicable scenarios of futures mainly include:
-Hedging risk: the futures trading period is short, which can achieve the purpose of hedging risk more quickly;
-Speculative investment: the transaction cost of futures is relatively low, which can save the investment cost;
-Rapid investment: the risk of futures trading is relatively low, which can better control the investment risk;
-Responding to market changes: Futures trading is more flexible and can better cope with market changes.
2. Long-term applicable scenarios
Long-term applicable scenarios mainly include:
-Long-term investment: Long-term transactions can better achieve the purpose of long-term investment;
-Risk reduction: the forward transaction cost is relatively high, which can better control the investment risk;
-Long-term investment: Forward trading is less flexible and can better cope with market changes.
Fourth, summary.
Futures and forward are two important financial instruments in the financial market, and they are essentially different in terms of contract term, transaction mode, transaction object, transaction cost, transaction risk and transaction flexibility. In addition, they also have their own advantages and are suitable for different scenarios. Therefore, investors should choose the most suitable financial instruments according to their investment objectives and risk tolerance when choosing futures and forwards.