- Let’s say you need to roll forward your contract. You need to sell 1M USD spot to unwind the previous forward, and buy 950K USD forward to enter new contract. This is the same as selling 50K if you want to rebalance in between the forward maturity date. If you’re not rebalancing, but closing out the previous 1M forward by selling 1M USD in the spot rate, then you use the same side of the bid-ask spread you use for the 950k forward purchase. So you get the same result as if you had just rebalanced by selling 50k.
This was in my notes. Look at the bolded part. Why would you use the same bid-ask quote (on one of the sides) for the 1M sale as the same side of the 950k purchase?