What is a Short Forward Position?

What is a Short Forward Position?

An investor who agrees to sell an underlying asset for a fixed price at a fixed future date through a forward contract is said to be in the short forward position. This investor would benefit if the price of the underlying asset falls.

The payoff is the delivery price – spot price maturity.

Example: An trader holds shares in company C and expects the market value of these to fall in the next few months. He enters into forward contracts for these shares and fixes the selling price at $60, with a maturity of 6 months. He is in the short forward position. He will make a profit if the share price on the maturity date is less than $60.

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