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Without a futures market, you don't get futures, you get forwards, don't you? Forwards don't have enforcement for when the seller goes bankrupt, which leaves th

• colechristensen 4y ago
  Calling them forwards implies that they are tradable securities. I’m talking about going to the local farmers coop and purchasing next years fertilizer, fuel, etc. months in advance for a set price to be paid and delivered in the future. When you sell your outputs it’s a good idea to buy your inputs at the same time. The outputs are often exchange traded commodities, the inputs are often contract purchases with local dealers although you can also hedge with appropriate exchange traded commodities.
• c_o_n_v_e_x 4y ago
  >Without a futures market, you don't get futures, you get forwards, don't you? Forwards don't have enforcement for when the seller goes bankrupt, which leaves the buyer out any money paid in the forward contract and needing to find another supply at market price. That's my understanding, at least. Correct. You have an over the counter market with different derivatives. > Forwards don't have enforcement for when the seller goes bankrupt, which leaves the buyer out any money paid in the forward contract and needing to find another supply at market price. That's my understanding, at least. You're referring to counter party risk. A futures exchange seeks to eliminate this type of risk with daily settlement of positions, margins, etc.