What is an Assignable Contract?

An assignable contract allows a contract holder to assign his or her rights and obligations under the contract to a third party. The most common assignable contracts are futures contracts.

How Does an Assignable Contract Work?

Let's assume you own a futures contract to buy corn at a certain price in the future, and the value of the contract has increased by $10,000 since you bought it. Because futures contracts are often assignable, you can sell the contract to a third party today in return for cash, and the third party then assumes all the rights, responsibilities, and financial outcome of the contract from that point forward.

Not all futures contracts are assignable, especially those traded on exchanges.

Why Does an Assignable Contract Matter?

Assignable contracts provide a way for contract holders to lock in profits or cut losses without having to wait for the expiration date. If you are interested in buying or selling a contract, make sure to carefully check its terms and conditions to see if it is assignable or not.