framtíðarsamning

Framtíðarsamningur is an Icelandic term that translates to "futures contract" in English. It is a standardized legal agreement to buy or sell a particular commodity or asset at a predetermined price at a specified time in the future. These contracts are traded on exchanges, ensuring transparency and liquidity.

The primary purpose of a futures contract is to manage price risk. Producers and consumers can use them to lock in prices, protecting themselves from adverse market fluctuations. For example, a farmer can sell futures contracts for their crops to guarantee a certain price, while a food manufacturer can buy futures contracts to secure their raw material costs.

Futures contracts are also used for speculation. Traders can bet on the future direction of prices without needing to own the underlying asset. If they believe the price of a commodity will rise, they can buy futures contracts, and if they believe it will fall, they can sell them.

The value of a futures contract is derived from the value of the underlying asset, which can include commodities like oil, gold, or agricultural products, as well as financial instruments such as currencies or stock indices. The terms of the contract, including the quantity of the asset, the quality, and the delivery location, are standardized by the exchange on which it is traded.

Settlement of a futures contract can occur either through physical delivery of the asset or through a cash payment based on the difference between the contract price and the market price at expiration. However, the vast majority of futures contracts are closed out before expiration through offsetting trades.