Hedging is to use the profit of one market to make up for the loss of another market, or to make up for the loss of spot through hedging business in the futures market, which invisibly forms the psychology of pursuing the profit of the futures market. This one-sided pursuit of profit in the futures market seriously violates the basic principles and theories of hedging, and it is easy to fall into the misunderstanding of speculative trading, thus incurring greater risks. The best way to prevent hedging from becoming speculation is to establish a perfect hedging effect evaluation mechanism, which comprehensively evaluates the hedging effect from the futures and spot markets, rather than focusing only on the profit and loss of one market.

When the spot price of stocks rises or falls, long hedging and short hedging (or buy hedging and sell hedging) will produce the following results:

1. Completely hedged. The losses in one market are just offset by the profits in another market. Spot and futures prices change in the same direction and amplitude, and the loss (profit) in the spot market is exactly equal to the profit (loss) in the futures market.

2. Excessive compensatory hedging. The result of spot market is opposite because of futures trading, and the loser (or profit) of spot market becomes the ultimate profit (or loss) because of hedging trading. Spot and futures prices change in the same direction, but to different degrees. The futures price changes more than the spot price, and the result of spot trading is not only the same as that of complete hedging, but also over-compensation. The part where the futures price changes more than the spot price changes is the net profit and loss.

3. Insufficient compensatory hedging. The futures price changes in the same direction as the spot price, but the futures price changes less than the spot price. The losers (or profits) in the spot market are still losers (or profits) after hedging transactions, but the losses (or profits) have decreased, and the amount of losses depends on the difference in price changes.

4. Deteriorating hedging. Because the spot price is opposite to the futures price, hedging will generate additional losses or profits. For example, in long hedging, the spot price rises and the futures price falls, which will lead to the loss of two transactions. In this case, if the hedger did not engage in futures trading, his original situation would be better than now. However, due to the increasingly standardized futures market in China and the prevalence of arbitrage, especially spot arbitrage, the probability of this situation is very small. Even if the above situation occurs in a certain variety in individual months, the impact on the hedger is limited, which may be an excellent opportunity for spot arbitrage.

5. Neutral hedging. Futures prices remain unchanged, and the direction of spot price changes determines the result of hedging transactions. At this time, the only factor to be considered in hedging transaction is transaction cost.

The above effect evaluation system objectively and systematically evaluates the main aspects of hedging effect.

situation

The operation scheme of stock index futures hedging is as follows:

Time Stock Portfolio SSE 50 Stock Index Futures March Contract

Initial value of hedging: RMB 654.38+million; Price: RMB 365.438+000; Selling and opening positions: 15 lots

Hedging end loss: 5% closing price: 3000; Buying and closing positions: 15 lots

What is the hedging effect?

In order to evaluate the effect of this hedging, we must first calculate the final profit and loss of hedging:

Hedging profit and loss = spot market profit and loss+futures market profit and loss

= =- 10/00000 yuan× 5%+(3100-3000 )× 300×15 =-50000 (yuan)

Obviously, this kind of hedging belongs to insufficient compensatory hedging.