What Is a Forward Contract?

By Kristi Waterworth – Updated Sep 6, 2025 at 3:41 AM

Key Points

Forward contracts hedge risk by locking in future asset prices.
Unlike futures, forward contracts are private, non-tradeable agreements.
Forward deals can lead to gains or losses, depending on market changes.

Although most investors will never trade in forward contracts, they may be investing in companies that do. Understanding how this type of contract works for both parties can help you better understand your investments.

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About the Author

Kristi Waterworth has been a contributing real estate and financial expert at The Motley Fool, covering real estate, investing, and personal finance topics, since 2020. Kristi has been interviewed by various TV media outlets and podcasts for her real estate investing expertise – from residential real estate to digital real estate and everything in between. Kristi’s journalist career spans over 25 years, and she has written about real estate investing, homeownership, and home construction specifically for the last decade. She was also previously a licensed Realtor and general building contractor before the Great Recession and housing market collapse. She holds a bachelor’s degree in American history from Columbia College in Missouri.

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