Hedging refers to the trading activities in which the futures market is used as a place to transfer the price risk, and the futures contract is used as a temporary substitute for buying and selling commodities in the spot market in the future, so as to insure the prices of commodities to be bought in the future.

For example, in order to reduce the risk of falling crop prices at harvest, farmers sell future crops at a fixed price before harvest. Readers who subscribe to magazines for three years instead of two years are hedging the risk that the price of magazines may rise. Of course, if the price of the magazine drops, the reader will give up the potential income, because the subscription fee he pays is higher than the annual subscription fee he pays.

Second, the basic characteristics of hedging

In the spot market and the futures market, the same commodity is bought and sold in the same amount at the same time but in the opposite direction, that is, the same amount of futures is sold or bought at the same time in the futures market. After a period of time, when the price changes make profits and losses in spot trading, the losses in futures trading can be offset or compensated. Therefore, hedging mechanisms are established between "now" and "period" and between short-term and long-term to minimize price risk.

Third, the theoretical basis of hedging

The trends of spot and futures markets converge (under normal market conditions). Because these two markets are affected by the same relationship between supply and demand, prices rise and fall together. However, due to the opposite operation of these two markets, the profit and loss are also opposite, and the profit of the futures market can make up for the loss of the spot market.

The trading principles of hedging are as follows:

1. The principle of opposite transaction direction;

2. The principle of similar goods;

3. The principle of equal quantity of commodities;

4. The principle of the same or similar month.

In fact, hedging in the futures market is a kind of venture capital behavior aimed at avoiding the risk of spot trading, and it is an operation combined with spot trading.

Fourth, hedging strategy.

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". "Equivalence" means that the commodities traded in the futures market 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. Compare the net risk amount with the hedging cost, and finally determine 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.

Precautions of verb (abbreviation of verb) hedging

You should understand the standardized rules of the goods you choose to buy and sell. The goods you buy and sell are all "standard specifications", and the quality requirements are very strict, which is very different from ordinary spot transactions. The operation should strictly follow the four basic characteristics and principles of hedging transactions, namely, the opposite direction of trading, the same type of goods, the same quantity of goods, the same delivery month and so on.

Hedging transactions should calculate the basis, pay attention to the change of basis at any time, and end hedging transactions when the basis is favorable. Flexible use of the change of basis, the combination of commodity trading offset trading and physical delivery, and arbitrage between online trading market and traditional spot market can achieve the effect of only making a profit without losing money.

It should be recognized that the hedging function is limited. With the change of basis, the number of commodities bought and sold in the online trading market cannot be completely equal to the number of commodities to be hedged, the correlation between the price of substitute commodities and the price of spot commodities in the traditional market is not very strong, and the grade difference has great influence on the price of spot commodities in the traditional spot market but little influence on the price of commodities in the online trading market. All these will affect the hedging effect. Therefore, once the effect of hedging is expected to be affected, basis trading should be done to further strengthen the effect of hedging.

We should recognize the defensive characteristics of hedging transactions and not try to make huge profits through hedging. As a hedger, your biggest goal is to preserve the value, that is, to concentrate on the operation after transferring the price risk and obtain normal operating profits.

It is necessary to recognize the potential speculative risks in the market and rationally allocate funds. Take the online trading market as the investment channel. In the online trading market, commodity prices may change abnormally. Therefore, as a trader who has been engaged in buying and selling spot goods for a long time, he should fully analyze the difference between the traditional spot market and the online trading market, and change his attitude and method towards the online trading market by investing in the spot market. At the same time, when trading commodities, we should carefully consider the potential speculative risks in commodity trading, and do a good job in ideological preparation, capital preparation and countermeasures when the market commodity prices fluctuate abnormally. In addition, when conducting hedging business, we should have a clear understanding of the fluctuation area of commodity prices, leave enough room for manoeuvre, and choose a reasonable price to enter the market after seeing the price development trend clearly.

We should pay attention to the domestic economic trends and be alert. In order to stimulate domestic demand and economic growth, our government has increased basic investment. As a trader, while paying attention to the spot market situation of commodities, we should also predict the psychological impact of price changes of related products on people, try our best to avoid the short-term risks brought by price fluctuations and be aware of them.

We should make full and rational use of policies and open up new sales channels at reasonable prices. Traders have enough experience in commodity trading and mastered the changing law of commodity prices, so traders should make full and reasonable use of these conditions when investing in commodities. This can not only earn the difference between the traditional spot market and the online trading market, but also open up new sales channels.

All the above are the theoretical basis of hedging. When enterprises actually participate in hedging, they rarely achieve 100% hedging. According to the market situation, combined with the specific production and marketing situation, capital situation and operation situation of the enterprise, the operation situation is analyzed in detail. Generally, the corresponding scheme will be formulated according to the actual situation of the enterprise. Welcome to communicate.