Forward contract hedge and market-maker

Liquidity

Forward contracts are not heavily traded, so there is unlikely to be another forward contract available that can exactly offset the one sold (for a profitable price).

The easier (and cheaper) option is to borrow money, buy the stock and pay the interest.

If one could buy a forward contract that was cheaper than the cost of borrowing money, buying the stock and paying the interest, then one could buy that forward contract, sell the stock, collect the interest and make a profit...

The market-maker can and does offset the position they enter into (short forward in this example) with its exact opposite, if available to them. Mind you, barring any collateral management, this would still leave the market-maker with some counter party risk.

In practice, market-makers would offset the underlying price change risk with variety of instruments including forwards, futures, highly correlated other securities, credit default swaps, options, etc. It is the job of traders and risk managers to hedge effectively and to understand where residual risks remain.

Market makers even try to "create" market for the type of exposure they need, if hedging is difficult or expensive. For example, market-makers face demand from insurers and institutional investors for options, which pay if markets open significantly lower from a previous close. Such exposure is very difficult to hedge, so that market-makers try to sell warrants, that pay high coupon, but the principal takes a hit, when the market opens with a gap in order to offset the risk from the options they have sold.