Option forward - Oxford Reference

Option or forward, Encyclopedia

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    option or forward

    Forward Option See the same at the new domain: fincyclopedia. An option whose underlying is a forward contract.

    option or forward

    This option gives the holder the right to enter into a forward contract whereby he can buy or sell a specific underlying asset at a certain future time for a certain price determined in the forward contract.

    In a forward option, the contract specifies a period of time, rather than a certain date, during which the holder will exercise his right to trade the underlying.

    option or forward

    The forward option is, in essence, an agreement to trade in the future for a fixed price set today. There are several types of financial forward contracts that are used as underlying.

    Financial institutions quote forward exchange rates for commercial customers.

    option or forward

    Forward contracts on Treasury securities, known as when issued WI contracts trade in the week preceding a Treasury auction. Furthermore, the so-called "to be allocated" TBA mortgage-backed securities can be sold forward. Options on such contracts or instruments trade over the counter daily among wholesale dealers in the underlying cash securities.

    option or forward

    An example is a forward call option which gives the holder, if exercised, a long forward contract associated with a specific exercise option or forward.

    The value of the exercised call is equal to that of the delivered forward contract.

    option or forward

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