A forward exchange contract which gives the buyer the right to choose when to exchange currencies between two preset dates. This structure allows for delays in effecting the underlying trade until a future date. Pricing of this contract is based on the worst rate observed over the life of the option. As an example, consider a EUR/USD trade. The spot rate as of today is EUR/USD 1.4382, and the six-month outright EUR/USD rate on offer today is EUR/USD 1.5620. If an investor is contemplating buying Euro against USD six months forward on an outright basis, the option-dated forward contract can come in handy. Entering into this type of forward contract will allow the investor to postpone the forward trade to a future date at which he may be in a better position to choose between exercising the option at the initial trade rate or to let go and transact at the outright spot available at the future date.

The first course of action would be followed if the future spot rate turns out to be higher than the outright future rate quoted at the initial trade date, while the second route would possibly be viable in the opposite case, when the future spot rate happens to be lower.