Futures
An agreement to buy or sell something at a set price on a set date. Invented to remove uncertainty, routinely used to take it on.
The invention
The problem. A farmer's income depends on a price six months away that nobody can know.
The Dojima Rice Exchange in Osaka ran standardised, cleared rice futures from the 1730s — the first true futures market. Chicago's Board of Trade formalised the Western version in 1848 for grain moving down the Mississippi. Both were built by producers wanting certainty, and both attracted speculators immediately.
Grain elevator, Idaho
2005-01-01 · Library of Congress · Public domain
Rice Plant and Butter-Burs
19th century · The Metropolitan Museum of Art · CC0
Where it has failed
Not a list of disasters. A pattern library.
- 1869New York
Black Friday
An attempt to corner the gold market collapsed when the Treasury sold, ruining many participants.
Corners depend on the counterparty being unable to deliver. When that counterparty can print, the corner ends.
- 1994Germany and Singapore
Metallgesellschaft and Barings
One firm lost over $1bn on a hedge whose maturities did not match its obligations; another was destroyed by one trader's futures positions.
A hedge that does not match the exposure in timing is a new speculative position wearing a hedge's name.
- 2020Chicago
The negative settlement
The expiring WTI contract settled below zero because holders had nowhere to put physical oil.
Physical settlement is not a formality. A contract obliges you to actually take the thing.
Where it stands today
You now have the shape. Here is the reading.
Live from public data, pulled at request time. Read it with the failures above in mind — not because a repeat is due, but because knowing the mechanism is what lets you recognise one early.
Retail gasoline, all grades
U.S. Energy Information Administration
No data returned
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U.S. Energy Information Administration
In your ledger
Invisible but present: futures set the price of fuel and food weeks before you pay it at the pump or the register.
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