Since the price of metallic copper once rose from 30,000 yuan/ton to the highest of 80,000 yuan/ton in a short time, the overall price of metallic copper has remained high since then, and the price of metallic copper also fluctuated violently. Therefore, many metal copper processing enterprises will first discuss the price of raw materials within the possible scope, and then buy them back as soon as possible. Although this can avoid risks to a certain extent, there are also many problems. For example, the occupation of funds, the price difference caused by time, and the goods in the peak season? So how can the hedging business avoid such risks?
Example: 1: A copper processing factory signed a supply contract for 1 000 tons of copper wire on August/October, 2007, and delivered it at the end of February, 2008 at a price of 75,000 yuan/ton. According to the cost accounting and production plan, the processing cycle is about one month, and 1000 tons of electrolytic copper must be prepared in the last ten days of 165438+ 10, and the processing cost is about 6000 yuan/ton, so the price of electrolytic copper should not be higher than 69000 yuan/ton. For fear of rising copper prices, we can use the futures market to buy hedging, and buy 20081October copper futures 1 1000 tons at the price of 68,000 yuan/ton on the same day, so if the copper price of1October rises to 70,000 yuan/ton, a copper. In this way, although the copper processing plant spent 1 1,000 yuan per ton when purchasing copper raw materials, it earned 1 1,000 yuan per ton in futures, thus ensuring the stable purchase price of raw materials at 69,000 yuan/ton. Although the price of copper rose, it did not affect the profit of copper factory, which effectively locked in the profit through hedging. (At the same time, the processing fee of 1 1,000 yuan/ton will be transferred to futures. Because China does not tax futures profits, it reduces the difference between purchase and sale of production and achieves the purpose of reasonable tax avoidance.
There is another situation: by June 1 1, copper prices had fallen. For example, the price of copper has dropped to 68,000 yuan/ton. Although the factory lost 1000 yuan/ton in futures, it can buy the spot in the spot market at a price lower than the current price 1000 yuan/ton, and it can make up for it.
Another way to buy a hedge is spot delivery. Copper processing plants can also deliver 1000 tons of copper on the spot. This method is also often used in practical operation.
As can be seen from the above examples, copper processing enterprises can make full use of the hedging function of the futures market to effectively avoid market risks, stabilize raw material prices, reduce costs and lock in processing profits. In this way, the possible risks of copper processing enterprises in raw material procurement are expected to be solved. Of course, the above example is only to buy hedging because of fear of rising raw material prices. On the contrary, if the enterprise is worried about the falling price of raw materials, it can avoid the risk by selling hedging.
Secondly, in many ways, the futures market can be said to be an indicator of the leading economy. A long-term understanding of the futures market can reveal the current situation of many things and predict their future trends. It can be said that understanding the current situation of the futures market means understanding the economy. If a metal processing enterprise does not only process one kind of metal, but finds and effectively judges the future price trend of this metal material through the understanding of metal products with futures market, regardless of whether this product enters the futures market or not.
Thirdly, as mentioned above, many processes now talk about the price first, and then purchase raw materials at one time in the shortest time, which reduces the risk. Then there is the problem that a large sum of money is occupied by raw materials. It takes a process for enterprises to pay for raw materials. Then through hedging business, enterprises can liberate a lot of money.
Example 2: Enterprise A needs to purchase 120 tons of copper raw materials. In order to avoid the price risk of raw materials, enterprises need to purchase raw materials at one time120 * 65000 = 7.8 million. But don't buy at one time, and worry about the risks brought by rising prices. Then enterprises can buy the main contract of 120 tons of copper in the futures market. At that time, the price was 120*65500/ ton = 7.86 million. Because the futures market adopts the margin system, you only need to pay the margin when purchasing the contract, and the margin of futures copper is about 10%. If 120 tons of copper is completely hedged in the futures market, it needs to pay a deposit of 786,000 yuan, but the result is that enterprise A has liberated nearly two-thirds of its working capital while avoiding the price risk. If you place a reasonable order in collocation, you can completely expand your order-taking ability with the same funds as before.
In the practical application of hedging business, it is not a mechanical and dogmatic hedging operation. Obviously, when the market price is optimistic, there is no need to sell hedging to avoid the decline in the sales price of products. At this time, it is necessary to avoid the risk of rising raw material purchase price and buy hedging. On the contrary, if the market price is low, it is not necessary to buy hedging to avoid the price risk of raw material procurement, but to sell hedging to avoid the price risk of product sales. Therefore, through in-depth analysis and research on the market, it is very important for copper processing enterprises to grasp the market situation as accurately as possible, make scientific use of the futures market and implement the corresponding hedging scheme.
So in the hedging business, what does the enterprise need to pay to get the above benefits? The margin in the futures market is only 10%. And spare some time to communicate with us every day, so that we can serve you better. The above briefly explains what hedging can bring to metal processing enterprises for your enterprise. If you have any questions, please feel free to consult us, and we will spare no effort to answer them. The hedging business in the futures market has become more and more perfect for a long time, and it has been involved in all walks of life abroad and has been paid attention to. I hope this business can also contribute to the development of your company.
Price discovery,
The so-called price discovery function refers to the process that the futures market forms a real, predictable, continuous and authoritative price through an open, fair, efficient and competitive futures trading operation mechanism. Merton miller, winner of the Nobel Prize in Economics, said: "The charm of the futures market lies in letting you really know the price." The advantage of futures market in price formation determines that it has the function of price discovery. First of all, the futures price is formed by the centralized trading of exchange participants, which is completely different from the spot price where participants are relatively scattered and privately traded. Centralized trading gathers many traders and bids in a free and open environment, so the futures price is more real and authoritative than the spot price. Secondly, the futures price represents the settlement price of the market at a specific time and place in the future. Many participants trade with different expectations, and the trading results represent the market's views on future prices, so the futures market has the function of discovering prices. This reflects that the price discovery function of futures market must meet three conditions: first, there are many participants in futures trading; Secondly, most futures traders are familiar with a certain commodity market; Third, futures trading is highly transparent.
I. Literature review
Personally, theoretically speaking, studying the price discovery function of futures market can be summed up as the following two questions: First, is there a long-term equilibrium relationship between futures prices and spot prices? Second, if there is a long-term equilibrium relationship between futures prices and spot prices, what is the causal relationship between futures prices and spot prices? That is, is the change of futures price the reason for the change of spot price? Or is the spot price change the cause of the futures price change? In other words, is there a cointegration relationship between futures prices and spot prices? If so, is the change of futures price ahead of the change of spot price? Or does the spot price change before the futures price changes? Therefore, in many empirical studies, scholars combine causality test and cointegration test to analyze the price discovery function of futures market: Zhu (2007) [2] found that there is a long-term equilibrium relationship between domestic and international futures prices of copper and soybeans, but there is no long-term equilibrium relationship between domestic and international equilibrium prices of wheat; Gong Guoguang (2007)[③] found that there is an obvious co-integration relationship between the futures market price of natural rubber and the spot market price; Li Huiru (2006) [4] found that there is a long-term equilibrium relationship between cotton futures price and spot price, and both futures market and spot market play a role in price discovery, and futures market is in a dominant position in price discovery; Liu Xiaoyu (2006)[⑤] found that there is a mutual guiding relationship between soybean meal futures price and spot price, and there is a long-term equilibrium relationship between fire and spot price; As early as 2002, Hua Renhai and Zhong [6] found that there was a cointegration relationship between copper and aluminum futures prices and spot prices, and futures prices had a good price discovery function. It can be seen that there are different views on whether the futures market has the price discovery function we usually define.
Second, about the function of futures price discovery.
For the price discovery function of the futures market, there is a question whether the futures price is the spot price expected by the spot in the future. Chen Rong and Zheng Zhenlong (2007) [7] hold that speculators decide futures prices according to their expectations of future futures and future spot prices, while arbitrageurs decide futures prices according to current spot prices. Therefore, whether the futures price is determined by the future spot price or the current spot price depends on whether the power of speculation or arbitrage ultimately determines the futures price. They believe that in a perfect market where you can borrow freely, buy short and sell short freely, the power of arbitrage is infinite, so the ultimate decisive force of futures price is the arbitrageur. That is, in this market, the futures price is not the expectation of the future spot price, but determined by the current spot price.
In this regard, from the financial engineering risk-free arbitrage strategy to find the answer. Taking the underlying assets that generate a certain dividend interest rate during the futures duration as an example, assuming that the current time is T, the market risk-free continuous compound interest is R, and the continuous compound interest of the underlying assets during the futures duration is Q, we can construct the following two combinations when pricing futures:
Portfolio A: A long-term contract, which stipulates that the underlying assets of a unit can be traded at the delivery price plus cash amount K*EXP[-r(T-t)] on the maturity date T.
Portfolio B: EXP[-q(T-t)] unit securities, and all income is reinvested in the securities.
In portfolio A, cash of K*EXP[-r(T-t)] is invested at risk-free interest rate R, and the investment period is (T-t). At time t, when the forward contract expires, you can get K yuan in cash, which is just used to deliver the long position of the forward contract and get the assets of one unit. Similarly, the number of securities owned by portfolio B also increases with the increase of dividends and reinvestment. At time t, it also becomes a unit target asset, and its value is exactly equal to the value of portfolio A. According to the principle of risk-free arbitrage, two combinations with equal value at time t must also have equal value at time t, namely:
f+K * EXP[-r(T-T)]= S * EXP[-q(T-T)]
According to the definition, the futures price F is the delivery price that makes the value of the futures contract F zero, from which F= F=S*EXP[-q(T-t) (1) can be obtained.
If the formula (1) is not established, the market arbitrage forces will gain risk-free profits by buying the spot to sell futures or buying futures to short the spot, until the relationship between the futures price and the spot price meets the formula (1), and the market reaches an arbitrage-free equilibrium.
From the derivation of formula (1), it can be seen that the decision of futures price depends entirely on the power of arbitrage rather than the prediction of future prices by buyers and sellers.