What does Forward Booking mean?
Forward booking means entering into a booking contact for a commodity at a future date at a specified rate of exchange. A party would enter into such a contract with a booking company to minimize the risk of exchange rate volatility. The party to the contract assumes that the rate of exchange will go up and hence, the party has entered into a favorable contract by specifying a lower rate of exchange. Such contracts also specify the timeline in which the contract must be fulfilled.
Futures Knowledge Explains Forward Booking
For example, Mr. ABC needs to buy a machinery from Europe 3 months from now. Since, the Euro is currently trading low and he expects it to only rise in the next 3 months, he would enter into a booking contract. The booking company would enter into such a contract expecting the Euro to fall.