Closing and clearing positions refer to individuals or institutions selling tradable varieties such as stocks, bonds and futures in their accounts. But the difference between liquidation and clearance is that liquidation is to forcibly sell the shares in the account; Clearance is an operation in which investors take the initiative to sell all stocks at one time.
Why do most futures transactions end in liquidation?
This is determined by the rules of futures trading. Unlike stocks, chips are fixed. Futures traders can open multiple orders or empty orders out of thin air at any time (as long as there are counterparties), so the number of futures contracts is constantly changing. The more active the trading, the more participants and the more new futures contracts.
Due to the regulations of the exchange, the physical delivery of commodity futures can only be carried out by legal entities, and individuals cannot carry out physical delivery. And near the delivery month, in order to avoid the default of both parties, the margin ratio will be greatly increased than usual. Then before the delivery, on the one hand, all individual investors should close their positions, on the other hand, they should reduce their positions if the margin is insufficient. So most futures contracts will end early.
If you buy 1 contract to open a position, you don't have to add a new contract. Because it may be that a former long-term holder has transferred his 1 long-term contract to you. This is called changing hands. It's like a hot potato passed from Zhang Shan to you. Your liquidation will definitely not result in a new contract, and it may also reduce one contract. The first possibility: you throw away the long contract in your hand and the result is that the new Lisi receives it. Then this is also called changing hands. The total market position remains unchanged.
The second possibility: you flatten the long contract in your hand, just as you flatten the short contract in your hand. So how flat is it for you? The opponent's disk is empty. The total market position decreased.
Under what circumstances do stocks generally need to be cleared?
When the stock rises sharply, it appears sideways. At this time, it is necessary to assess the situation, seize the time to close the position, or the stock rises to achieve the expected goal, and then sell the clearance; If the stock has been below its bottom line and there is no hope of rising, it is necessary to stop the loss in time and clear the position in time.