1. Hedging: refers to buying (selling) futures contracts with the same quantity as the spot market, but in the opposite direction, so as to compensate for the actual price risk caused by price changes in the spot market by selling (buying) futures contracts at some future time. The most basic types of hedging can be divided into buying hedging and selling hedging. Buying hedging refers to buying futures contracts through the futures market to prevent losses caused by rising spot prices; Selling hedging refers to selling futures contracts through the futures market to prevent losses caused by falling spot prices. Hedging is the driving force of the futures market. Whether it is the agricultural futures market or the metal and energy futures market, its appearance stems from the spontaneous trading behavior of buying and selling forward contracts when enterprises face the risks brought by the sharp fluctuation of spot prices in the production and operation process. The trading mechanism of this forward contract has been continuously improved, such as standardizing the contract, introducing hedging mechanism and establishing margin system, thus forming modern futures trading. Enterprises purchase insurance for production and operation through the futures market, which ensures the sustainable development of production and operation activities. It can be said that the futures market is not a futures market without hedging. Example: hedging operation skills of bull market and bear market
1. In the bull market, the copper price of hedging transactions of CLP producers showed an upward trend. Obviously, CLP manufacturers rarely worry about the sales risk of their products. For producers who own mines, raising prices is very beneficial to enterprises, which can gradually sell and hedge in the futures market according to market conditions on the basis of ensuring the profit price level. For smelters with insufficient raw materials (copper concentrate), they will be more worried about weakening the profitability of products because of the rapid rise in raw material prices. China enterprises usually adopt the following two trade methods to import copper concentrate.
(1) "Point price" In this trade mode, producers of electric copper can completely choose the right price according to their own needs to lock in their production costs.
(2) Average price Under this trade model, the producers of electric copper will obviously face greater risk of raw material prices in the process of rising copper prices. In order to avoid this risk, enterprises need to hedge their trading activities in the spot market through the futures market. For the hedging transaction flow, see case 1: A copper company signed a copper concentrate supply contract with a foreign metal group company on June 1999, in which TC/RC was 48/4.8, the pricing month was 1999+02, and the contract settlement price was LME (. After signing the contract, the company was worried that the continuous large-scale production restriction activities might lead to a sharp rise in copper prices, so it decided to hedge the concentrate trade. At that time, the LME March copper contract price was 1380 USD/ton. (Later, the price of copper really rose. By the pricing month, the contract price of LME March copper has risen to 1880 USD/ton, and the average settlement price of March copper is 18 10 USD/ton. ) So the company immediately bought 3,000 tons of futures contracts in the futures market at the price of 1.380 USD/ton, (which means that the target cost of copper concentrate determined by the company =1.380-(48+4.8 * 22.5) =1.224 USD/ton). (Copper concentrate price =1810-(48+4.8 * 22.5) =1654 USD/ton) The company sold 3,000 tons of futures contracts in the futures market at the price of 1880 USD/ton. Table 1 copper concentrate futures contract target cost price 1224 USD/ton, actual payment price 1380 USD/ton, selling position 1654 USD/ton, profit and loss of 430 USD/ton and profit and loss of 500 USD/ton. The results in table 1 show that copper companies not only hedge through this kind of buying, but it should be specially pointed out that copper producers can hedge not only through selling, but also through buying. In fact, in the bull market, the hedging strategy of electric copper production enterprises should be mainly buying and hedging. But here, we also remind traders that this case is to unify hedging activities under the same market environment (LME). If we have to complete the above hedging transaction in the domestic futures market due to some domestic policy restrictions, we must consider the influence of exchange rate factors on hedging activities.
2. The hedging transactions of CLP copper producers in the bear market.
(1) For enterprises with their own mines, the cost is relatively fixed, and the decline in copper prices directly weakens the profitability of enterprises, so enterprises still have to sell in the futures market to preserve their value and reduce losses; When extreme circumstances occur and the copper price falls below the enterprise cost price or even the social average cost price, can enterprises adopt it? Quot Risk hedging strategy ". Case 2: After 1999 1 quarter, the domestic copper price not only fell below the lowest cost line of a copper enterprise, but also fell below the recognized social average cost price (1480 USD/ton). Faced with such a market situation, the company judges that large-scale international production restriction activities will definitely lead to a sharp rise in copper prices. Based on this judgment, in order to reduce losses, the company decided to adopt the marketing strategy of "restricting sales and storage". Two months later, the company's inventory was close to 20 thousand tons, and the copper price did not rise as much as they expected. In this context, the company's liquidity is becoming more and more difficult. Therefore, the company further adopted the risk hedging strategy. First of all, they began to increase their inventory sales in the spot market, and bought forward futures contracts equal to the inventory sold in the spot market every day to keep their resources unchanged. A few months later, when the futures market price reached the preset target selling price, the company immediately closed all the futures contracts it bought, thus effectively getting rid of the loss dilemma. In this case, in order to avoid the product price risk, the company broke the routine of "hedging by selling", so we put this hedging transaction as a special case and boil it down to risk hedging. The purpose is to show that investors don't have to stick to the traditional model when making hedging plans. In fact, the methods and approaches of hedging transactions will also be developed and enriched in the long-term practice. Enterprises have every reason to formulate various capital preservation strategies in a specific market environment according to the basic principles of hedging. However, it must be pointed out here that this kind of hedging transaction is generated in a special market background, and enterprises must be cautious when applying it, and must consider whether the judgment basis of the market environment is sufficient; Whether the commitment degree and cycle of enterprise anti-risk funds are sufficient, etc.
(2) For the producers of imported electric copper smelting, when the copper price falls, they seldom consider the cost factor, that is, the price risk of concentrate, but they are more worried that the price of their products will fall too fast and they will suffer risk losses. Because in most cases, enterprises will not hold orders when organizing production. Therefore, they must consider using the hedging function of the futures market to transfer the sales risk. In this kind of hedging transaction, manufacturers often determine the hedging amount according to their inventory quantity or planned sales quantity, and determine the sales price of futures contracts according to their profit targets. Case 3:1A copper company in early 998, based on data analysis, was worried that copper prices would drop sharply. So the company decided to hedge its product-electric copper according to the planned sales volume of 4000 tons per month. In the futures market, the company sold 5,6,7,8 at the prices of 65,438+07, 450 yuan/ton, 65,438+07, 850 yuan/ton, 65,438+08,050 yuan/ton, 65,438+08 and 250 yuan/ton respectively. And the company takes the spot price at that time as the target price 17200 yuan/ton. After entering the second quarter, the spot copper price really fell to 1.65 million yuan/ton. According to the predetermined trading strategy, the company began to buy the futures contract of Heping warehouse in May from April 65,438+0, according to its actual weekly sales. The results of hedging transactions at the end of April are as follows: Table 2 Target selling price of spot market futures market: 17200 (yuan/ton) Planned sales volume: 4000 (ton) May futures contract selling price: 17450 (yuan/ton). Actual sales in the first week of the contract quantity of 4,000 (ton): 1000 ton, average sales price16,500 yuan/ton, sales loss of 700,000 yuan, contract closing amount 1000 ton in May, closing price16,650 yuan/ton, closing position. The sales loss per ton is 750,000 yuan, the contract closing price in May is 1 10,000 tons, and the closing profit is 850,000 yuan. In the third week, the actual sales were 1 1,000 tons, the average sales price was 1 6,400 yuan/ton, and the sales loss was 800,000 yuan. The closing profit per ton is 900,000 yuan. In the fourth week, the actual sales volume was 1 1,000 tons, the average sales price was 1.64 million yuan/ton, and the sales loss was 800,000 yuan. The contracted purchase volume in May was 1 1,000 tons, and the closing profit was 65,438 yuan/ton. The accumulated sales amount is 4,000 tons, the accumulated sales loss is 3.05 million yuan, and the accumulated liquidation profit is 35,000 yuan. Therefore, the actual sales price of the company is 17290 yuan/ton. This result shows that the company has effectively avoided the business risks brought by the decline of copper prices through hedging transactions, and achieved the company's expected target sales price. The same is true of the trading process in the next few months, and I will not repeat it in this article. Through this case, it can be concluded that in the bear market, CLP copper production enterprises should mainly sell hedging under the existing investment market conditions.
3. Hedging transactions of copper processing enterprises in bull market In the process of rising copper prices, the starting point of hedging transactions is the same as that of copper production enterprises. They will also think that the biggest market risk comes from the rising prices of raw materials. Therefore, processing enterprises hope to determine their expected target cost by establishing long positions corresponding to the spot trading volume in the futures market, which has been explained above. In fact, we can express the application conditions for purchasing hedging in this way. Whether it is a production enterprise or a processing enterprise, if they judge that the market risk comes from the price risk of raw materials, the enterprise will adopt the trading method of buying hedging to avoid the risk.
4. Hedging transactions of copper processing enterprises in the bear market In the process of falling copper prices, copper processing enterprises will also pay less attention to the risk of raw material costs, but pay more attention to the fact that their product prices will fall with the decline of raw material prices, thus weakening the profitability of their products. Faced with such market risks, they often hedge through the commodity futures market to avoid the price risk of future products. Case 4: A cable factory still has 3000 tons of copper core cables in stock by the end of 1998. The average copper cost of producing these cables is 18500 yuan/ton, and the lowest selling price of these cables in the profit target is = copper price +2000 yuan/ton. (Selling price of normal profit = copper price+3,000 yuan/ton) At that time, the cable price still fell with the decline of copper price, and now it has fallen to 20,500 yuan/ton. If it continues to decline, the cable in stock in this factory will not be able to achieve its minimum profit target. So the factory decided to use the futures market for hedging, and immediately sold 3,000 tons of March copper contracts in the futures market at the futures price of 1.75 million yuan/ton. At the end of the first week of liquidation, the factory sold 600 tons of cables in stock, with an average price of 20,300 yuan/ton. At the same time, the factory bought 600 tons of futures contracts in the futures market at the futures price of 17250 yuan/ton, and closed its futures contracts. At the weekend of the second week, the factory sold another 700 tons of cables in stock, with an average price of 20,000 yuan/ton. At the same time, the factory bought another 700 tons of futures contracts in the futures market at the futures price of 16950 yuan/ton, and continued to liquidate its futures contracts. In the third and fourth weeks, the factory sold 800 tons and 900 tons of cables in stock at the average selling prices of 19900 yuan/ton and 19800 yuan/ton respectively, and at the same time of liquidation at the weekend, they sold them at the average selling prices of 16850 yuan/ton and 16750 respectively. The results of this hedging transaction are shown in the following table. Table 3 Time Spot Market Inventory Telegram 3000 Tons Profit Target Sales Price 20500 Yuan/ton Futures Market Selling Futures Contract Position 3000 Tons Futures Contract Price 17500 Yuan/ton First Week Sales Inventory Telegram 600 Tons Average Sales Price 20300 Yuan/ton Loss 1 20000 Yuan Remaining Inventory Telegram 2400 Tons Buying and Closing 600 Tons Closing Price/KLOC-0 7250 yuan/ton profit 1438 lost 350,000 yuan/ton, the remaining stock cable 1.700 tons, the closing price 1.6950 yuan/ton, the profit was 385,000 yuan, and the remaining empty warehouse was 65,438 yuan +0.700 yuan/ton, and it was sold in the third week. Buy and close 800 tons; The closing price is 16850 yuan/ton; The profit is 520,000 yuan; The remaining empty warehouse is 900 tons; In the fourth week, 900 tons of cables were sold in stock; The average selling price is 1.98 million yuan/ton; Loss of 630,000 yuan; Buying a closing price of 900 tons; The closing price is 654.38+06, the profit of 750 yuan/ton is 675,000 yuan, and the remaining short positions are hedged. As a result, the loss was 6.5438+0.58 million yuan and the profit was 6.5438+0.73 million yuan. Through the results shown in Table 3, the actual sales price of 3000 tons of cable in stock in this factory is 20530 yuan/ton, which completely avoids the risk loss caused by the falling product price. We can express the application conditions of selling hedging in this way. Whether it is a production enterprise or a processing enterprise, when they judge that the market risk faced by the enterprise comes from the product price risk, the enterprise will choose to sell hedging to avoid the risk.