I'm new to this stuff, and have the following question:
In John C. Hulls book the following scenario is presented: on May 15 we enter into a contract to sell 1 mill barrels of oil for the market price on August 15. The oil future expiring on that day are 79 dollars. We can hedge our position by selling 1000 contracts (for 1000 barrels each), and closing them out near August 15. It is then easy to see that in all cases we get 79 million in total (for the contract + the futures)
Now my question is, why did we enter into the contract in the first place? It seems much simpler to just sell 1000 future contracts and not close the position, but just let them expire. Then we still get our 79 million in the end.
A related question: in practice, can a position always just be closed without problems? Is there not a significant risk of not finding a counter party to close the position and being stuck with the futures?