One of the basic economic functions of futures market is to provide price risk management mechanism for spot enterprises. In order to avoid price risk, the most commonly used means is hedging.

The main purpose of futures trading is to transfer the price risk of producers and users to speculators. When spot enterprises use the futures market to offset the reverse movement of spot market prices, this process is called hedging.

Hedging is also translated as "hedging transaction" or "Qin Hai".

Its basic practice is to buy or sell commodity futures contracts with the same number of transactions but opposite directions in the spot market, so as to hedge and settle the profits or losses arising from futures trading at a certain moment in the future, so as to compensate or offset the actual price risks or interests brought about by price changes in the spot market and stabilize the economic interests of traders at a certain level.

(2) Hedging principle

First, in the process of futures trading, although the change range of futures price and spot price will not be exactly the same, the change trend is basically the same. That is, when the spot price of a specific commodity tends to rise, its futures price tends to rise, and vice versa.