If you want to enter the futures market, you must first have a full understanding of the industry.
Basic overview of hedging
Hedging refers to the trading activities in which the futures market is used as a place to transfer the price risk, and the futures contract is used as a temporary substitute for buying and selling commodities in the spot market in the future, so as to insure the prices of commodities to be bought in the future.
For example, in order to reduce the risk of falling crop prices at harvest, farmers sell future crops at a fixed price before harvest. Readers who subscribe to magazines for three years instead of two years are hedging the risk that the price of magazines may rise. Of course, if the price of the magazine drops, the reader will give up the potential income, because the subscription fee he pays is higher than the annual subscription fee he pays.
The basic characteristics of hedging: buying and selling the same commodity in the spot market and the futures market at the same time, that is, selling or buying the same amount of futures in the futures market while buying or selling the real thing. After a period of time, when the price changes make the profit and loss in spot trading even, the losses in 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 (under normal market conditions), because these two markets are affected by the same supply and demand relationship, and their prices rise and fall together; However, due to the opposite operation of these two markets, the profit and loss are also opposite, and the profit of the futures market can make up for the loss of the spot market.
The trading principles of hedging are as follows:
1. The principle of opposite transaction direction;
2. The principle of similar goods;
3. The principle of equal quantity of commodities;
4. The same or similar principles.
In fact, hedging in the futures market is a kind of venture capital behavior aimed at avoiding the risk of spot trading, and it is an operation combined with spot trading.
What is the function of hedging?
The key to the correctness of enterprise's production and management decision lies in whether it can correctly grasp the market supply and demand state, especially whether it can correctly grasp the next changing trend of the market. The establishment of the futures market not only enables enterprises to obtain the supply and demand information of the future market through the futures market, but also improves the scientific rationality of the enterprise's production and operation decision-making, and truly determines the production on demand. It also provides a place for enterprises to avoid market price risks through hedging, which plays an important role in improving the economic benefits of enterprises.
To sum up, the role of hedging in the production and operation of enterprises:
① Lock in the production cost and realize the expected profit.
(2) Organizing spot production by using futures price signals.
③ Expand spot sales and purchase channels in the futures market.
④ Futures market urges enterprises to pay attention to product quality.
[Edit this paragraph] Business process of hedging
Soybean hedging case
Example of selling hedging: (This example is only used to illustrate the principle of hedging, and the specific operation should consider the transaction fee, position fee and delivery fee. )
In July, the spot price of soybean was 20 10 yuan per ton. A farm is satisfied with the price, but soybeans will not be sold until September, so the unit is worried that the spot price may fall by then, thus reducing its income. In order to avoid the risk of future price decline, the farm decided to trade soybean futures on Dalian Commodity Exchange. The transaction situation is shown in the following table:
Spot market futures market
In July, the soybean price was 20 10 yuan/ton, and the transaction was 10 lot. September soybean contract: the price is 2050 yuan/ton.
Soybean sold in September100t: price 1980 yuan/ton; Buy soybean 10 lot in September: the price is 2020 yuan/ton.
Arbitrage results in a loss of 30 yuan/ton and a profit of 30 yuan/ton.
The final net profit is 100*30- 100*30=0 yuan.
Note: 1 hand = 10 ton.
From this example, we can draw the following conclusions: First, the complete sell hedging actually involves two futures transactions. The first is to sell futures contracts, and the second is to sell the spot in the spot market and buy the original position in the futures market. Second, because the trading order in the futures market is to sell first and then buy, this example is selling hedging. Third, through this set of hedging transactions, although the spot market price has changed adversely to farms, the price has dropped by 30 yuan/ton, resulting in a loss of 3,000 yuan; However, trading in the futures market made a profit of 3,000 yuan, eliminating the impact of adverse price changes.
Examples of purchasing hedging:
In September, an oil factory estimated that 10/00 tons of raw soybean was needed in October. At that time, the spot price of soybean was 20 10 yuan per ton, and the oil factory was satisfied with the price. It is predicted that the soybean price may increase by 5438+065438+ 10 in June. Therefore, in order to avoid the risk of rising raw material costs caused by future price increases, the oil factory decided to conduct soybean hedging transactions on Dalian Commodity Exchange. The transaction is as follows:
Spot market futures market
In September, the soybean price was 20 10 yuan/ton. Buy 10 lot 165438+ 10 month soybean contract: offer 2090 yuan/ton.
10/00 tons of soybeans1/kloc-0: the price is 2050 yuan/ton; Sell 10 lot 165438+ 10 month soybean contract: offer 2 130 yuan/ton.
Arbitrage results in a loss of 40 yuan/ton and a profit of 40 yuan/ton.
The net profit of the final result is 40* 100-40* 100=0.
From this example, we can draw the following conclusions: First, a complete buy hedging also involves two futures transactions. The first is to buy a futures contract, and the second is to buy a spot in the spot market and sell the position originally held by the hedger in the futures market. Second, because the trading order in the futures market is to buy first and then sell, this example is buying hedging. Third, through this set of hedging transactions, although the spot market price has changed adversely to the oil plant, the price has increased by 40 yuan/ton, so the cost of raw materials has increased by 4,000 yuan; However, the trading in the futures market made a profit of 4,000 yuan, thus eliminating the impact of adverse price changes. If the oil factory does not hedge, he can get cheaper raw materials when the spot market price falls, but once the spot market price rises, he must bear the losses caused by it. On the contrary, he hedged in the futures market, although he lost the profit of favorable changes in the spot market price, but he also avoided the loss of unfavorable changes in the spot market price. Therefore, it can be said that buying hedging avoids the risk of price changes in the spot market.
[Edit this paragraph] The method of hedging
1. Sales hedging of producers
As a provider of social goods, both farmers who provide agricultural and sideline products to the market and enterprises that provide basic raw materials such as copper, tin, lead and oil to the market can adopt the transaction mode of selling hedging to reduce the price risk, that is, selling the same amount of futures as the seller in the futures market to ensure the reasonable economic profits of the goods they have produced or are still selling to the market in the future, so as to prevent the price from falling and suffering losses when they are officially sold.
2. The operator sells the hedging.
For the operator, the market risk he faces is that when the goods are not resold after being acquired, the price of the goods will fall, thus reducing his operating profit and even causing losses. In order to avoid this market risk, operators can use the method of selling hedging to carry out price insurance.
3. The overall hedging of processors.
For processors, market risks come from buyers and sellers. He is worried about rising raw material prices and falling finished product prices, and even more afraid of rising raw material and finished product prices. As long as the materials and finished products that the processor needs can be traded in the futures market, he can use the futures market for comprehensive hedging, that is, buying the purchased raw materials and selling the products, which can relieve his worries and lock in his processing profits, thus specializing in processing and production.
[Edit this paragraph] Hedging strategy
In order to better achieve the purpose of hedging, enterprises must pay attention to the following procedures and strategies when conducting hedging transactions.
(1) Adhere to the principle of "equality and relative". "Equivalence" means that the commodities traded in the futures market must be the same as those traded in the spot market in terms of types or related quantities. "Relative" refers to the opposite buying and selling behavior in two markets, such as buying in the spot market, selling in the futures market, or vice versa.
(2) Spot transactions with certain risks should be selected for hedging. If the market price is relatively stable, there is no need to hedge, and the hedging transaction needs a certain fee.
(3) Compare the net risk amount with the hedging cost, and finally determine whether to hedge.
(4) According to the short-term price trend forecast, calculate the expected change of basis (that is, the difference between spot price and futures price), and make the timing plan for entering and leaving the futures market accordingly, and implement it.
Basis and hedging
Hedging can generally offset the risk of price fluctuation in the spot market, but it cannot completely eliminate the risk, mainly because of the "basis difference" factor. In order to deeply understand and apply hedging and avoid price risk, we must master the foundation and its basic principles.
The meaning of basic differences
Basis refers to the difference between the spot price of a specific commodity at a specific time and place and the futures price of the latest contract of the commodity, that is, basis = spot price-futures price.
The Relationship between Basis and Trading Hedging
For example, on May 30, 2003, the spot price of soybean in Dalian was 2700 yuan/ton, and on that day, the price of soybean 1 futures contract in July 2003 was 2620 yuan/ton, so the basis was 80 yuan/ton. Basis can be positive or negative, depending on whether the spot price is higher or lower than the futures price. If the spot price is higher than the futures price and the basis is positive, it is also called forward discount or spot premium; If the spot price is lower than the futures price, the basis is negative, which is also called forward premium or spot discount.
Basis consists of two components, namely "time" and "space", which separate the spot market from the futures market. So the basis includes the transportation cost and holding cost between the two markets. The former reflects the spatial factors between the spot market and the futures market, which is the basic reason why the basis difference between the two different places is different at the same time; The latter reflects the time factor between the two markets, that is, the holding cost of two different delivery months, and also includes storage fee, interest, insurance premium, loss fee, etc., among which the change of interest rate has a great influence on the holding cost.
Basis change and hedging
In the process of real commodity price movement, the basis is always changing, and the changing form of the basis is very important for a hedger. When the futures contract expires, the spot price and futures price tend to be consistent, and the basis changes seasonally. Hedgers can use the futures market to reduce the risk of price fluctuation. The change of basis is the basis for judging whether hedging can be fully realized. Hedgers can not only get better hedging effect by taking advantage of the favorable change of basis, but also get extra surplus through hedging transactions. Once the basis changes adversely, the effect of hedging will be affected and suffer certain losses.
For the hedger, what he wants to see is the narrowing of the basis.
1. Both the spot price and the futures price have risen, but the increase of the spot price is greater than the decrease of the futures price, and the basis has widened, so that the loss suffered by the processor in buying the spot due to the increase of the spot market price is greater than the profit gained by selling the futures contract due to the increase of the futures market price.
If the prices in the spot market and the futures market fall instead of rising, then the processors will make profits in the spot market and lose money in the futures market. But as long as the basis is enlarged, the profit of the spot market can not only make up for the loss of the futures market, but also lead to a net loss.
Two. Both the spot price and the futures price have risen, but the increase of the spot price is less than that of the futures price, and the basis is reduced, so that the loss suffered by the processor in buying the spot market due to the price increase is less than the profit gained by selling the futures contract in the futures market due to the price increase.
If the prices in the spot market and the futures market fall instead of rising, then the processors will make profits in the spot market and lose money in the futures market. But as long as the basis is reduced, the profit of the spot market can not only make up for all the losses in the futures market, but also make a net profit.
For the hedger, what he wants to see is the spread widening.
1. Both the spot price and the futures price have fallen, but the spot price has fallen more than the futures price, and the basis has narrowed, so that the losses suffered by traders in selling the spot due to the drop in the spot market price are greater than the profits gained by buying futures contracts due to the drop in the futures market price.
If the prices in the spot market and the futures market rise instead of falling, traders will make profits in the spot market and lose money in the futures market. However, as long as the basis is reduced, the profit of the spot market can only make up for some losses in the futures market, and the result is still a net loss.
Two. Both the spot price and the futures price have fallen, but the drop of the spot price is less than that of the futures price, and the basis has widened, which makes the losses suffered by traders selling the spot due to the drop of the spot market price less than the profits gained by buying futures contracts due to the drop of the futures market price.
If the spot price and futures price do not fall but rise, the banker will make a profit in the spot market and lose in the futures market. But as long as the basis is enlarged, the profit of the spot market can not only make up for all the losses in the futures market, but also get a net profit.
The change trend of futures price and spot price is consistent, but the time and range of price changes are not completely consistent, that is to say, at a certain moment, the basis is uncertain, and the hedger must pay close attention to the change of basis. Therefore, hedging is not a once-and-for-all thing, and adverse changes in basis will also bring risks to hedgers. Although hedging can't provide complete insurance, it does avoid the price risk related to the business. Hedging is basically a risk exchange, that is, price fluctuation risk exchanges basis fluctuation risk.
Which is more cost-effective, futures hedging or liquidation?
According to the popular understanding of hedging, hedging is ultimately to close the position in the futures market and hedge the spot deficit with the profit and loss of futures. However, in reality, some hedgers choose to make final delivery in futures, which seems to be using the futures market for spot trading, which violates the original intention of establishing the futures market. Under what circumstances will the hedger choose delivery instead of liquidation?
There are two modes of hedging: buying hedging and selling hedging. Buying hedging is to lock in the purchase cost, and selling hedging is to lock in the sales profit. Then we can see which is more cost-effective from the perspective of low cost and high profit, liquidation or delivery.
If footnote 0 indicates the beginning of hedging and footnote 1 indicates the end of hedging, there are four prices at two time points:,,, and, in which ≈ considering that the futures contract is close to the delivery date and the basis is close to zero at the end of hedging.
Purchase hedging
If the futures are closed, the final hedger will buy the goods at the spot market price, but considering the profit of the futures, the actual purchase price is =
If the futures are delivered, the hedger will eventually go to the delivery warehouse to receive the spot. Considering the futures profit and delivery cost c, the actual purchase price is =
In this way, if the delivery cost c is greater than the basis at the end of the hedging, the bullish hedging is not suitable for delivery. This situation is more common, because the basis is theoretically equal to -C, that is, the spot price difference is equal to the delivery cost. Of course, if the spot market is in short supply, the hedger will be willing to pay the delivery cost c to meet the actual demand of the spot.
Sales hedging
Here, for the sake of understanding, we assume that the hedger buys the spot at this price.
If the futures are closed, the hedger will eventually sell the goods at the spot market price, but considering the futures profit, its actual sales profit is =
If the futures are delivered, the last hedger will organize the source to register the warehouse receipt. Considering the futures profit and delivery cost c, the actual sales profit is =
In this way, if the delivery cost c is greater than the spot spread at the end of the hedging-,selling the hedging is not suitable for delivery. On the contrary, it means that the spot spread is too large and there is spot arbitrage space, so it should be delivered.
Summary: From the above discussion, it can be found that it is not cost-effective to buy hedging delivery; For selling hedging, if there is a spot arbitrage opportunity in the delivery month, it can be delivered, but this opportunity is relatively rare. Of course, in fact, many buyers deliver goods in order to obtain high-quality spot, while many sellers deliver goods in order to carry out spot arbitrage and quickly recover the payment, which are the needs of spot operation.
Hedging strategy of stock index futures [2]
1. Sell stock index futures
If investors own stocks and predict that the stock market will fall, they can use selling stock index futures contracts to hedge and reduce losses.
Example:
An investment institution owns a stock portfolio with a value of 6.5438+0.2 million yuan. At this time, the futures price of Shenzhen Component Index is 654.38+00000 points. In order to avoid the losses caused by the stock market decline, the institution sells three-month Shenzhen Stock Exchange futures contracts for hedging. After a period of time, the stock market fell, and the value of the stock portfolio owned by investment institutions fell to 654.38+0.08 million yuan, and the futures price of Shenzhen Stock Exchange Index was 9000 points. Investment institutions buy Shenzhen Stock Exchange to close futures contracts. Like this:
Stock market loss: 6.5438+0.2 million yuan.
Futures market profit: 654.38+10,000 yuan = (10000-9000) points × 100 yuan/point (assuming that the Shenzhen Stock Exchange Index futures contract multiplier is 100 yuan, the same below).
Final actual loss of investment institution: 20,000 yuan.
From this example, we can see that stock index futures contracts reduce the loss of investment institutions simply investing in stock portfolios.
Second, buy stock index futures.
If investors plan to buy stocks after a period of time, but predict that the stock market will rise in the near future, they can lock in the future buying cost of stocks by buying stock index futures contracts.
Example:
A fund management company expects that one of its institutional clients will subscribe for the fund in two months. If you use this fund to buy a stock portfolio at present, the portfolio value is 950,000 yuan, and the futures price of Shenzhen Stock Exchange Index is 10000 points. At this time, the fund bought the Shenzhen Stock Exchange futures contract for two months to lock in the cost. After a period of time, the stock market rose, the value of the stock portfolio that the fund planned to buy rose to10.06 million yuan, and the futures price of Shenzhen Stock Exchange Index was10.654,38+0.500 points. Investors sell Shenzhen Component Index futures contracts and close their positions. Therefore:
Stock market loss: 1 10000 yuan (the buying cost is higher than two months ago).
The profit of the futures market is 150000 yuan = (1kloc-0/500-10000) points × 1000 yuan/point.
Final profit of investors: 40,000 yuan
As can be seen from the example, stock index futures lock in the cost of investors buying stocks after a period of time.
The difference between hedging and speculation
1, the purpose of the transaction is different.
Hedging is a way to avoid or transfer the risks caused by the rise and fall of spot prices, so as to lock in profits and control risks; On the other hand, speculators hope to make high-risk profits.
2. The risks are different.
The hedger only bears the risk brought by the change of basis, and the relative risk is relatively small; Speculators need to bear the risks brought by price changes, and the risks are relatively large.
3, the operation method is different
The hedger's position needs to be set according to the spot position, and the hedging position and the spot position operate in opposite directions, with the same or similar types and quantities; Speculators, on the other hand, trade according to their own amount of funds, occupancy rate of funds, psychological endurance and judgment of trends.