What is the difference between forward and future contracts in the context of cryptocurrency trading?

1 answers

• Tranberg HvassJul 13, 2023 · 2 years ago
  Forward and future contracts are both used in cryptocurrency trading, but they have distinct differences. Forward contracts are customized agreements between two parties, allowing for flexibility in terms of contract size, expiration date, and settlement currency. These contracts are traded OTC, which means they are not regulated by an exchange. Future contracts, on the other hand, are standardized contracts traded on regulated exchanges. They have set contract sizes, expiration dates, and settlement methods. Future contracts also require margin accounts, which can increase trading costs. Overall, the choice between forward and future contracts depends on individual trading goals and risk tolerance. It's important to consider factors such as liquidity, regulation, and customization when deciding which type of contract to use in cryptocurrency trading.
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