It is generally easy to understand how to do more. Let's take shorting wheat as an example (the seller may not have the goods in his hand when signing the selling contract) to explain the principle of shorting the position:
When the price of wheat is 2000 yuan per ton, it is estimated that the price of wheat will fall. You signed a (first-class) contract with the buyer in the futures market, for example, you agreed to sell him 10 ton of standard wheat at a price of 2000 yuan per ton at any time within six months. (the value is 2000× 10 = 20000 yuan, calculated in 600 yuan. )
Why should a buyer sign a contract with you? Because he's awesome.
When you signed the contract, there was no wheat in your hand. You are observing the market. If the market drops to 1.800 yuan per ton as you wish, you can buy 10 ton of wheat at 1.800 yuan per ton and sell it to the buyer at 2000 yuan per ton. The contract is fulfilled (your performance bond is returned to you). You have earned:
(2000-1800) × 10 = 2000 (yuan) (the handling fee is generally10 yuan, which is ignored).
In practice, you only need to sell (short) the first-hand wheat in 2000 and buy the first-hand wheat in 1800, which is very convenient.
If the price of wheat rises within half a year, you have no chance to buy low-priced wheat to close your position, you will be forced to buy high-priced wheat to close your position (the contract must be closed at the expiration), you will lose money, and the buyer who signed with you will make a profit.
If you close your position at 2200, you will lose money:
(2200-2000)× 10=2000 (yuan)+10 yuan handling fee.
I wonder if you understand.