What does Forward Spread mean?
The difference between the spot price and the forward price of a commodity or security. Forward spread indicates the forward price trade discount. Though, forward spread looks similar to futures spread but is based on forward contract which is not traded in futures markets. Forward spread is also known as forward points.
Futures Knowledge Explains Forward Spread
A forward spread is expressed as the basis point difference between the spot and forward price. A basis point is one- hundredth, 100 basis points is equal to 1% or 0.01. For example, on June 15, 2015, Brent spot price is $63.33 a barrel and Brent forward contract price for July delivery is $63.87. The forward spread, the difference between the two prices, is 54 basis points.