Futures trading has two-way trading and hedging mechanism, that is, futures traders can buy futures contracts as the beginning of futures trading (called buying positions) or sell futures contracts as the beginning of trading (called selling positions), commonly known as "short selling". There is also a hedging mechanism associated with the characteristics of two-way trading. In most futures trading, when the contract expires, it is not fulfilled by physical delivery, but by trading in the opposite direction to the opening direction. Specifically, after buying a warehouse, you can cancel the performance responsibility by selling the same contract, and after selling a warehouse, you can cancel the performance responsibility by buying the same contract. The characteristics of two-way trading and hedging mechanism of futures trading attract a large number of futures speculators to participate in trading, because speculators have double profit opportunities in the futures market. When futures prices rise, they can buy low and sell high to make a profit. When prices fall, they can make profits by selling high and buying low, and speculators can avoid the trouble of physical delivery through hedging mechanism. The participation of speculators has greatly increased the liquidity of the futures market.
Futures trading has two-way trading and hedging mechanism.
Two-way trading, that is, futures traders can buy futures contracts as the beginning of futures trading (called buying positions) or sell futures contracts as the beginning of trading (called selling positions), commonly known as "short selling".
There is also a hedging mechanism associated with the characteristics of two-way trading. In most futures trading, when the contract expires, it is not fulfilled by physical delivery, but by trading in the opposite direction to the opening direction. Specifically, after buying a warehouse, you can cancel the performance responsibility by selling the same contract, and after selling a warehouse, you can cancel the performance responsibility by buying the same contract.
The characteristics of two-way trading and hedging mechanism of futures trading attract a large number of futures speculators to participate in trading, because speculators have double profit opportunities in the futures market. When futures prices rise, they can buy low and sell high to make a profit. When prices fall, they can make profits by selling high and buying low, and speculators can avoid the trouble of physical delivery through hedging mechanism. The participation of speculators has greatly increased the liquidity of the futures market.