Hedging is an operation mode used by investors to lock in profits and losses. To be sure, hedging can avoid certain risks, but in the case of investors' wrong estimation, it may also sacrifice some potential benefits. But hedging is a good choice for investors who pursue stable income. This paper will take long hedging as an example to illustrate.

1. What is long hedging?

Long hedging, also known as buy hedging, means that the hedger establishes a long trading position in the futures market for fear that the price of the target commodity or asset will rise in the future, that is, buys a futures contract with the commodity or asset as the subject matter.

Second, the use of long hedging:

1 Investors expect the price of target commodities or assets to rise in the future and want to hold a large number. However, whether you buy a large amount of funds directly or invest in batches, it will push up the price of goods or assets, thus increasing the cost of opening positions and narrowing the expected income. At this point, they can buy futures contracts with the commodity or asset as the subject matter in the futures market and establish long positions.

When an investor sells a call option in the option market and expects that the option will rise soon in the future, so that the counterparty chooses to exercise, the investor can choose to buy the relevant futures contract to offset the possible losses after the option is exercised.

If investors choose short selling and short selling, they expect that the future price will rise before the repayment period determined by short selling and short selling. In order to reduce or avoid the losses caused by the due repurchase, investors can choose to buy corresponding futures contracts to hedge the risks caused by price fluctuations.