This involves the futures hedging. The principle is to use the law that futures and spot markets rise and fall together in a rational market state (see attached figure), and use the futures market to transfer risks, stabilize profits and control costs in the spot market.

For example, at present, the main intraday price contract of cotton futures is 1205, and the spot price is 2 1000 yuan/ton, according to this year's purchasing and storage? The price is 19800 yuan/ton. A cotton textile enterprise purchased 65,438+0,000 tons of seed cotton for processing lint. However, considering the increase of cotton planting area in China this year, economic worries and weak demand for downstream veils, cotton prices are likely to fall. In order to maintain processing profits and stabilize these profits, cotton-related enterprises need to use the futures market to transfer risks when prices fall (also called avoiding spot risks), so they can short cotton in the futures market.

If the cotton futures market falls as expected, then the futures market will fall faster than the spot. If the cotton price really falls as expected in the later period, we can make up for the loss of the spot market by shorting this part of the profit in the profit futures market, so as to achieve the purpose of maintaining the value and transfer the risk of the spot price falling. If it goes up, it will wash away the position in the futures market, and the price increase in the spot market will bring more profits, which can be used to make up for the losses in futures.