Hedging is actually very complicated. To put it simply, under normal circumstances, futures and spot prices change in the same direction. If you buy hedging, you need to buy the futures contract six months later, that is, September. Once the spot Canadian dollar appreciates, the futures will generally appreciate as well, and the spot cost Increase, but the futures are profitable, and hedging can be achieved. Once the Canadian dollar depreciates, the spot cost decreases, but the futures loses money, and hedging is also achieved. Through such operations, the cost of spot goods is basically locked in.

The results of hedging are generally divided into three situations: compensatory hedging, in which the futures market partially hedges the profits and losses of the spot market, resulting in a certain loss; complete hedging, in which the futures market completely hedges the spot market. Market profit and loss; premium hedging, the futures market completely hedges the risks of the spot market, and there is a certain profit. Complete hedging is ideal, generally you will lose a little or make a little.

The spot market cost in March was US$4.32 million, and the spot cost in September was US$4.24 million, a cost reduction of US$80,000. The futures market carries out buying hedging and buys Canadian dollars. In September, the Canadian dollar appreciated by 0.0039 yuan in the futures market. If the handling fee is not taken into account, the futures market profit would be 0.0039X5 million yuan = 19,500 yuan. The hedging result was a profit of 99,500 yuan. It is a premium hedging and very successful.

I am quite careless, please forgive me if I make any mistakes.