framtíðarsamningnum

Framtíðarsamningur is an Icelandic term that translates to "futures contract" in English. It is a legal agreement to buy or sell a particular commodity or financial instrument at a predetermined price on a specified future date. These contracts are standardized and traded on exchanges, allowing for hedging and speculation.

The primary purpose of a futures contract is to manage price risk. For example, a farmer expecting to harvest a crop in six months can sell a futures contract today to lock in a selling price, protecting them from a potential drop in market prices. Conversely, a manufacturer who needs to buy that crop can buy a futures contract to secure a purchase price, mitigating the risk of rising costs.

Futures contracts are also used by speculators who aim to profit from anticipated price movements. They do not intend to take physical delivery of the underlying asset but rather to buy or sell the contract based on their market forecasts.

The underlying assets for futures contracts can be diverse, including agricultural products like wheat and corn, energy resources such as oil and natural gas, financial instruments like stock indices and currencies, and precious metals like gold and silver. The specific terms of each contract, including quantity, quality, and delivery location, are standardized by the exchange on which it is traded. Futures trading involves leverage, meaning a small amount of capital can control a large contract value, which amplifies both potential profits and losses.