Its main principle is actually to use the time difference in futures trading to hedge the value of profit difference. In fact, in popular terms, it is to take risks in the present in order to minimize the losses caused by future risks.
In order to better achieve the purpose of hedging, enterprises must pay attention to the following procedures and strategies when conducting hedging transactions.
(1) Adhere to the principle of "equality and relative". "Equality" means that the commodities traded in futures must be the same as those traded in the spot market in terms of types or related quantities. "Relative" refers to the opposite buying and selling behavior in two markets, such as buying in the spot market, selling in the futures market, or vice versa;
2) Spot transactions with certain risks should be selected for hedging. If the market price is relatively stable, there is no need to hedge, and the hedging transaction needs a certain fee;
(3) Comparing the net risk amount with the hedging cost, and finally determining whether to hedge;
(4) According to the short-term price trend forecast, calculate the expected change of basis (that is, the difference between spot price and futures price), and make the timing plan for entering and leaving the futures market accordingly, and implement it.