Can forward contracts be offset?

Forward contracts are private agreements between parties to buy or sell an asset at a specified future date for a specified price. These contracts are typically not traded on an exchange and are customized to fit the needs of both parties involved. One key characteristic of forward contracts is that they are largely illiquid and cannot be readily exchanged or offset against another position.

When we say that forward contracts cannot be offset, we mean that they do not have a secondary marketplace that allows for the easy transfer or closing out of these contracts. Unlike futures contracts, which are standardized and traded on exchanges (allowing positions to be offset by entering into opposite contracts), forward contracts must be settled as originally agreed upon at their maturity date, unless both parties agree to a termination or modification of the contract.

This is why the assertion that forward contracts cannot be offset is accurate. They are binding agreements that require performance by both parties, and the terms cannot be easily altered or substituted with another position in an efficient manner as can be done with more liquid financial instruments.