If the price falls after buying the spot, although the physical transaction suffers losses, futures hedging can make a profit; If the price rises after buying the spot, the futures hedging will lose money, but the spot trading will be profitable, and the profit and loss can be offset.
This practice of selling hedging can spread risks and protect the interests of actual users. Sales hedging is often adopted by processing enterprises, manufacturers and traders, which can reduce the risk of price fluctuation, help stabilize production costs and ensure profits.
Extended data
According to the goal of hedging, first sell the relevant appropriate futures contracts in the futures market. Then sell the spot in the spot market, buy the same futures contract in the futures market, hedge in the futures market, and end the actual hedging transaction.
Specifically, in order to keep the price of the actual goods sold in the spot market in the future at the level that suits them at present, traders should adopt the way of selling hedging to protect the income from selling the physical goods in the future.
Baidu Encyclopedia-Selling Hedges