Early termination

By entering into a new forward contract with opposite position, i.e. one long and one short.

Default Risk and Early Termination
For forward contracts, without a formal exchange and clearing house to guarantee delivery and payment, there is always a chance that either the buyer or the seller will default on an obligation. If one of these counterparties fails, the other is still responsible for performing under the contract.

Reversing trade prior to the expiration date will effectively increase the default risk exposure because two counterparties are involved. To extinguish default risk on a forward contract, a trader must place the reversing position with the same counterparty and under the same terms as in the originally contract.

Unlike forward contract, there is no default risk on futures as the clearing house acts as a counterparty, guaranteeing delivery and payment.