Hedging means that one investment deliberately reduces the risk of another investment. This is a way to reduce business risks while still making profits from investment. General hedging is to conduct two transactions at the same time, both related to the market, in the opposite direction, with the same amount and breakeven. Market correlation refers to the identity of market supply and demand that affects the prices of two commodities. If the relationship between supply and demand changes, it will affect the prices of two commodities at the same time, and the prices will change in the same direction.

Hedging settlement refers to that after traders open their positions in the futures market, most of them do not end their transactions through delivery (that is, spot settlement), but through hedging settlement. After buying and opening a position, you can cancel your obligation by selling the same futures contract; After selling and opening a position, you can cancel the performance responsibility by buying the same futures contract.

Extended data

1. Arbitrage strategy: the most traditional hedging strategy.

Arbitrage strategies include convertible bond arbitrage, spot arbitrage of stock index futures, intertemporal arbitrage, ETF arbitrage and so on. , are the most traditional hedging strategies. Its essence is the application of the "one-price principle" in the pricing of financial products, that is, when there are pricing differences between different manifestations of the same product, buy relatively undervalued varieties and sell relatively overvalued varieties to obtain the intermediate price difference income. So the risk of arbitrage strategy is the smallest, and some strategies are called "risk-free arbitrage".

2. Annual Alpha Distribution of Index Enhanced Portfolio+Index Futures in Short-term Rolling

Statistical arbitrage performance based on 90 securities margin targets

3. Alpha strategy: Turn relative income into absolute income.

4. Neutral strategy: Starting from the dimension of eliminating β.

Market neutrality strategy can be simply divided into statistical arbitrage and fundamental neutrality, trying to build a long-short combination to avoid risk exposure while pursuing absolute returns. The establishment of bulls and bears is no longer isolated or even synchronized. The bulls and bears are strictly matched to build a market neutral combination. Therefore, the income comes from stock selection, regardless of the market direction-that is, pursuing absolute income (Alpha) without taking market risk (Beta).

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