Long hedge: refers to investors who hold cash or are about to hold cash. In order to control transaction costs, they first buy stock index futures and lock in the price level of future stocks. Future cash will be invested in the stock market, and future positions will be closed.
Short hedging: refers to the trading behavior of investors who already hold stocks or will hold stocks in order to prevent the risk of stock portfolio decline and predict the stock market decline, and sell stock index futures in the futures market.
According to different objectives, stock index futures hedging can be divided into positive hedging and negative hedging.
Active hedging: usually with the goal of maximizing returns, stock index futures are selectively hedged by anticipating the future trend of stocks to avoid market systemic risks. When the systemic risk comes, investors take active hedging measures to avoid the systemic risk of stock portfolio; When the systemic risk is released, the future positions in the futures market will be closed without corresponding reverse spot trading.
Passive hedging: the goal is to minimize the risk, mainly in the futures market and the spot market for the same number of operations in opposite directions. The main purpose of this kind of traders is to avoid the systemic risks faced by the stock market, but as for obtaining profits through hedging, it is not the main pursuit goal of this kind of traders.