Hedging principle: the activities of traders to manage the risks arising from changes in their own assets and liabilities and realize futures trading and derivatives trading that are basically consistent with the above assets and liabilities.

Hedging, commonly known as "Qin Hai", also known as hedging transaction, refers to the fact that traders sell (or buy) futures trading contracts with the same amount as hedging in the futures exchange while buying (or selling) actual commodities. It is an act of temporarily replacing physical transactions with futures transactions in order to avoid or reduce the losses caused by unfavorable price changes.

The basic characteristics of hedging: at a certain point in time, the same commodity is bought and sold in the spot market and the futures market at the same time, but in the opposite direction, that is, at the same time of buying or selling the physical object, the same amount of futures is sold or bought in the futures market.

After a period of time, when the price changes make the spot trading profit or loss, the profit or loss of futures trading can be offset or compensated. Therefore, hedging mechanisms are established between "now" and "period" and between short-term and long-term to minimize price risk.

Theoretical basis of hedging: the trend of spot and futures markets is similar. Because these two markets are affected by the same relationship between supply and demand, prices rise and fall together. However, due to the opposite operation and profit and loss of these two markets, the profit of futures market can make up for the loss of spot market, or the appreciation of spot market is offset by the loss of futures market.

Trading principle:

1, the principle that the transaction direction is opposite.

2, the principle of similar goods.

3, the principle of equal quantity of goods.

4. The principle of the same or similar month.