Comment by Majromax

> All futures should be settled by the actual commodity!

Why? The legitimate hedging role of futures and options is often financial in nature, even for physically-settled contracts.

Take West Texas Intermediate as an example. That's a physically-settled contract, with delivery in Cushing, Oklahoma.

What if I want to lock in a future price of oil but I'm not in Cushing, Oklahoma? Nobody's going to create a liquid futures market with delivery to my loading dock, but most of the time I can get oil on the spot market from a local supplier that already includes/amortizes the transportation cost.

It's far better for me to use the liquid futures market for hedging and still buy on the spot market, closing out the futures contract before delivery. For me, it's as if the futures market is cash-settled, even with a completely non-speculative transaction.