[kqr]

Saying that they were intended for hedging sounds like a very strong proposition to me. Chicago-style futures have (and have had, for as long as we know) numerous features that indicate speculation (or gambling, as it's also known) as one of their big reasons for existence.

They are also used to sell unconventional services (being long corn in August and short corn in July is effectively selling the service of transporting corn back in time) and,

perhaps most importantly, to make commodity loans (being long corn in the cash market and short corn in the futures market is a loan of corn.) This helps explain why, after removing costs of storage and insurance and such, prices are almost always in backwardation.

[Tenoke]

>Saying that they were intended for hedging sounds like a very strong proposition to me

I think most people believe this since every textbook I've seen explains them and implies that this is what they are for.

[kqr]

On this subject, almost every textbook is wrong. Well, I shouldn't say wrong, but their models fail to predict and explain easily observed real-world behaviour in futures markets.

I can strongly recommend Williams' The Economic Function of Futures Markets[1]. It gave me a lot of those "ooh, now that makes more sense" experiences after having heard the faulty model used in textbooks over and over.

[1]: https://www.amazon.com/Economic-Function-Futures-Markets-Wil...