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What’s the difference between futures contract and forward contract?

Though similar, these agreements are designed for different purposes.

Futures and forward contracts allow you to buy or sell a currency at a specified time in the future. However, these two agreements differ significantly when you consider their use, structure and more.

What are futures?

A futures contract is an agreement between parties to buy or sell a particular underlying asset at a specified rate and time in the future. They are traded on an exchange, so have clearing houses that guarantee the transactions.

Types of underlying assets include:

  • Currencies, including cryptocurrencies
  • Stocks
  • Exchange-traded funds (ETFs)
  • Bonds
  • Market indexes
  • Commodities
  • Precious metals

What are forwards?

Forwards – or forward contracts – are a private agreement between the buyer and seller to exchange the underlying asset for cash at a particular date in the future and at a set price. Forwards are settled at maturity, so the date the contract ends. Also, they are a private contract, so they’re not traded on an exchange.

How do futures and forward contracts differ?

Key differences between futures and forward contracts lie in their specificity, risk, transaction windows and goals.

Forward contractsFutures contracts
Flexibility on terms and conditionsPrivate agreement between a buyer and a seller to sell an asset at a set price in the future, not necessarily on a set date. Because they are privately negotiated agreements, you often have more flexibility to customize the terms and conditions of your agreement.Standardized agreement to buy or sell assets and commodities like currency at a set price or value on a specific date. Traded on regulated exchange. That structure leaves little room to change the underlying terms or conditions of the agreement. Instead, the buyer is obligated to take ownership of the asset the seller is providing on the contract’s settlement date — the date at which the contract expires.
Possibility of defaultingDepends on each private party to fulfill their end of the agreement, leaving room for default if either the buyer or seller isn’t able to.Traded on an exchange and backed by a clearing house. The support of that financial intermediary drops the risk of default significantly.
Window for fulfillmentCan close out the asset at its maturity or settlement date only.Marked to market every day, meaning the value of the asset is appraised daily. You can close out your position in the agreement before the contract’s maturity.
Goals and returnsTypically used to insulate investment from fluctuations in a currency’s exchange rate.Typically used by speculators looking to trade riskier currencies with the hope of large returns.

Do money transfer services offer futures contracts?

No, money transfer providers don’t offer futures contracts. This type of contract is mainly used by advanced investors to speculate on currency.

However, many online money transfer providers allow you to lock in an exchange rate using a forward contract. This tends to be offered as part of a suite of hedging tools designed to protect you against exchange rate fluctuations.

Compare foreign exchange providers

Our table lets you compare the services you can use to send money abroad. Compare services on transfer speeds and fees, then click Go to site when you're ready to send.
Name Product Filter Values Fastest Transfer Speed Fees (Pay by Bank Transfer) Learn More
OFX
24 hours
$0

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OFX has no maximum limit transfers, with competitive exchange rates for 45+ currencies.
Dunbridge Financial
Dunbridge Financial
24 hours
$0

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Dunbridge Financial offers competitive exchange rates and zero fees on transfers to more than 120 countries.
CurrencyTransfer
24 hours
$0
SPECIAL OFFER ✓ Minimum transfer of $1,000 for Finder readers (normally £5,000)

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Exclusive: Minimum transfer of $1,000 for Finder readers (normally $5,000).
CurrencyTransfer lets you shop around for the best exchange rate on its online marketplace.
XE
Within minutes
$3

View details
XE has fast transfers with low fees and a range of foreign currency tools.
Wise (TransferWise)
Within an hour
From $2.26

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Wise uses the mid-market rate and transparent fees to help you send money in 45+ currencies.
Instarem
Within an hour
$1

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Use code HAPPY22 to get USD 22 off your first transfer. Valid for transfers over USD 250 and till 31 January 2022. T&Cs apply.
Instarem offers zero transfer fees on all transfers.
Remitly
Within minutes
From $0
SPECIAL OFFER ✓ Free transfers and better exchange rates available for new customers

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Special offers like free transfers and better exchange rates available for new customers.
Remitly has quick, affordable transfers around the world, with both express and economy options.
WorldRemit
Within an hour
From $1.99

View details
Use code Take10USD to get $10 off when you spend $20. Valid till 31 January 2022. T&Cs apply.
WorldRemit sends money to 110+ countries for bank-to-bank deposits, cash pick-ups or mobile top-ups.
MoneyGram
Within an hour
From $0

View details
MoneyGram has fast cash pick-up transfers to more than 350,000 agent locations worldwide.
OFX International Money Transfers (Business)
24 hours
$0

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Business customers: Send safe, no-limit transfers with no fees and competitive exchange rates.
CurrencyTransfer for Business
24 hours
$0

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Increase business efficiency with zero transaction fees and same-day transfers.
Western Union
Within an hour
From $0

View details
Western Union sends money online to friends and family in 200+ countries around the world.
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