Identifier: C3T6L1 · Revision: 2026-10-26 · Classification: restricted

Decision and objectives

Read forward points and an outright FX rate in the stated convention. The decision record must connect the exposure, cash dates and implementable contract, rather than stop at a favorable price forecast.

By the end, you can read forward points and an outright FX rate in the stated convention; map both currencies and value dates on a confirmation; choose the executable side for a payment hedge.

Prerequisite: C3T5L4; completed Classes 1 and 2 and the Stock Market School foundation or Forex School foundation. All cases below are hypothetical; their prices, costs, rates, dates, contractual assumptions and collateral amounts are teaching inputs, not current offers.

Mechanics

A currency forward is a bilateral obligation to exchange or settle currencies on a future date at a rate agreed now. Unlike a standardized future, amount, maturity and collateral can be tailored with a bank or other permitted provider. An outright rate is the full exchange rate. Forward points are an addition or subtraction in the dealer's stated scale; the word points does not supply that scale.

A confirmation should identify parties, buy and sell currencies, exact amounts, trade and value dates, deliverable or cash settlement, fixing source, payment accounts, holidays, collateral, early termination and governing agreement.

Price and return drivers

Outright = spot + signed forward adjustment, after converting points to quotation units. Use the ask when buying the base currency in a quote/base pair and the bid when selling it, subject to the actual offer convention. A mid rate is a comparison reference, not the customer's executable rate.

Worked case

Hypothetical spot bid/ask 40.00/40.04 TRY/USD. Forward adjustments for the stated maturity are +1.20/+1.30 TRY/USD, already converted from any dealer point scale. Outright bid/ask is 41.20/41.34. A USD 50,000 importer buys at 41.34 and owes TRY 2,067,000 on the agreed value date, receiving USD 50,000 under deliverable terms. Service fee TRY 1,000 and supplied credit-line charge TRY 2,000 give total TRY 2,070,000 before tax. No principal is exchanged today under this assumed unsecured confirmation; the credit line still consumes capacity.

Adverse case

If the bank's adjustment is actually 130 points with 0.0001 quotation units per point, the adjustment is 0.0130, not 1.30. Misreading it by that factor creates a TRY 64,350 difference on USD 50,000 between the two rates. A correct rate with wrong value date or unverified beneficiary account can also fail to settle the invoice. Spot falling by maturity does not permit unilateral cancellation of the forward.

Practical use

Access is negotiated and subject to provider authorization, onboarding, suitability, credit and transaction-specific restrictions; this lesson does not promise retail availability. Obtain a written executable confirmation rather than a marketing description. Include spread embedded in the outright, service/credit charges, collateral funding, transfer and termination charges. Tax depends on investor status and settlement form; no live rate is assumed.

Reconcile the confirmation, position register and cash statement separately. Costs include the quoted bid/ask spread, brokerage and clearing charges, collateral or principal financing, currency conversion, custody where relevant, and exit or termination charges. A mark is not a fill. Any amount explicitly excluded below remains outside the reported result. Tax is excluded from these teaching cases: an actual comparison requires income year, investor residence and individual/corporate status, contract and acquisition dates, settlement form and effective law. The GIB guide, checked 2026-10-26, covers 2025 individual investment income, so its publication date alone does not settle a 2026 derivative liability.

Decision boundaries

Use a forward when its exact cash-flow alignment and credit terms fit the obligation. Do not sign if the point scale or value date cannot be reconciled to currency amounts. A future offers standardized clearing but different cash timing; neither is automatically cheaper without a common cost boundary.

Practice and references

Exercise: hypothetical spot ask 32.10, signed points +85 with scale 0.0001 TRY/USD. Calculate the outright and USD 20,000 payment, adding a separate TRY 500 fee. Solution: outright ask = 32.10 + 85 × 0.0001 = 32.1085. Buying USD 20,000 requires TRY 642,170 at maturity; a separate TRY 500 charge makes TRY 642,670 before tax. State the scale and both cash amounts in the decision record.

Takeaway: Choose the executable side for a payment hedge using the actual cash schedule, with every excluded cost and remaining exposure stated.

Reference card: fx-forward. Formula: Forward points to outright rate. Glossary: Forward points, Outright forward rate. Next lesson: C3T6L2. Topic test.

Sources and verification date (2026-10-26):

Shared reference guide