[Verse 1]
Sarah wants to buy some wheat but harvest is three months away
She's worried that the price will rise before that future day
So she calls up farmer Joe and makes a deal today
Lock in the price at fifty dollars, no matter what markets say
[Chorus]
Forward contracts, future deals
Lock the price, that's how it feels
Buyer and seller shake hands tight
No exchange, just bilateral might
F-O-R-W-A-R-D spells the way
To trade tomorrow at today's display
[Verse 2]
Unlike a spot transaction where you pay and get right now
Forward contracts wait for settlement, let me tell you how
The underlying asset could be gold or oil or grain
Delivery date is specified when both parties make their claim
[Chorus]
Forward contracts, future deals
Lock the price, that's how it feels
Buyer and seller shake hands tight
No exchange, just bilateral might
F-O-R-W-A-R-D spells the way
To trade tomorrow at today's display
[Bridge]
Long position takes delivery, hopes the price will climb
Short position makes delivery, timing is sublime
Hedgers manage their risk exposure
Speculators seek disclosure
Custom terms negotiated
No standardization created
[Verse 3]
Market participants include the corporations large and small
Hedging price risk is their mission, they don't want to take a fall
Speculators join the party seeking profits from price moves
Arbitrageurs find the differences, that's how the market grooves
[Chorus]
Forward contracts, future deals
Lock the price, that's how it feels
Buyer and seller shake hands tight
No exchange, just bilateral might
F-O-R-W-A-R-D spells the way
To trade tomorrow at today's display
[Outro]
When spot means now and forward waits
These contracts seal financial fates
Remember the structure, remember the names
Forward contracts, that's how we play the games