A forward spread is the difference in price between two forward contracts. A forward contract is a type of derivative contract in which two parties agree to buy or sell an asset at a set price on a future date. A forward spread can be used to speculate on the future price movements of the underlying asset or to hedge against price risk. Typically, a forward spread is quoted as the difference in price between the two contracts, with the contract for the lower price subtracted from the contract for the higher price. The forward spread can be positive or negative, depending on the direction of the price movement.

A forward spread refers to the difference between the forward price and the spot price of an asset, typically in forex or commodities trading. It represents the cost or premium of entering a forward contract, which locks in a future price for an asset.

In forex, the forward spread is influenced by interest rate differentials between two currencies. If one currency has a higher interest rate than the other, it typically trades at a forward premium, while the lower-yielding currency trades at a discount.

For traders, understanding forward spreads is crucial for hedging and speculation. A widening spread may indicate increasing market risk, while a narrowing spread suggests market stability. Forward spreads help businesses manage future currency risks efficiently.