1. Hedging is a financial term that means that one investment deliberately reduces the risk of another investment. This is a way to reduce business risks while still making profits from investment. General hedging is to conduct two transactions at the same time, both related to the market, in the opposite direction, with the same amount and breakeven.

2. Option refers to a contract, which originated in the American and European markets in the late18th century. This kind of contract gives the holder the right to buy or sell assets at a fixed price on or before a certain date.

3. Futures, called futures in English, is completely different from spot. Spot is actually a tradable commodity. Futures are mainly not commodities, but standardized tradable contracts with some popular products such as cotton, soybeans and oil and financial assets such as stocks and bonds as the targets. Therefore, the subject matter can be commodities (such as gold, crude oil and agricultural products) or financial instruments.

Extended data:

Similar to the hedging of stock index futures, commodity futures also have hedging strategies. When buying or selling a futures contract, they sell or buy another related contract and close both contracts at a certain time.

The option buyer has the right to sell a certain number of specific commodities specified in option contracts to the option seller at a pre-agreed price, but he has no obligation to sell these commodities. The option seller is obliged to purchase the specific commodities specified by option contracts at the price specified in advance at the request of the option buyer within the validity period specified by option contracts.

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