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What is hedging?
What are the types of stock index futures investors?

According to the different purposes of entering the stock index futures market, investors in the stock index futures market can be divided into three categories: hedgers, arbitrageurs and speculators.

(1) Hedgers refer to institutions or individuals who avoid the risk of spot price fluctuation by buying and selling futures contracts with the same spot value but opposite trading directions in the stock index futures market.

(2) Arbitrator refers to an institution or individual who uses the unreasonable price relationship of "stock index futures market and stock spot market (spot arbitrage), different stock index futures markets (cross-market arbitrage), different stock index futures contracts (cross-commodity arbitrage) or different delivery months of the same commodity (inter-period arbitrage)" to earn differential income by buying and selling at the same time.

(3) Speculators refer to those institutions or individuals who specialize in buying and selling stock index futures contracts in the stock index futures market, that is, buying when they are bullish and selling when they are bearish to make a profit.

What is the principle of stock index futures hedging?

The reason why stock index futures have the function of hedging is that under normal circumstances, the price of stock index futures and the spot price of stocks are affected by similar factors, so their changing directions are the same. Therefore, as long as investors establish positions in the stock index futures market that are opposite to the spot market, when the market price changes, they will inevitably make profits in one market and lose money in the other. By calculating the appropriate hedging ratio, the approximate balance between loss and profit can be achieved, thus achieving the purpose of hedging.

For example, on 1 October 29th, 2006, 165438, the total value of an investor's stock portfolio (with a beta coefficient of1) was 5 million yuan, and the Shanghai and Shenzhen 300 Index at that time was 1650 points. The investor predicted that the stock market would fall in the next three months, but because his stock portfolio has strong dividend and stock delivery potential at the end of the year, he decided to use the futures contract of the Shanghai and Shenzhen 300 Index due in March 2007 (assuming that the contract multiplier is 300 yuan/point) to short hedge his stock portfolio.

Assuming that the futures price of1October 29th 1 1703 Shanghai and Shenzhen 300 Index is 1670 points, investors need to sell 10 contracts (that is, 5 million yuan /( 1670 points *300 yuan/). If the Shanghai and Shenzhen 300 Index falls to 1485 on March 0, 2007, the total market value of investors' stock portfolio will also fall to 4.5 million yuan, with a loss of 500,000 yuan. But at this time, the futures price of 0703 Shanghai and Shenzhen 300 Index fell to 1.503, so investors closed their futures contracts and made a profit of (1.670- 1.503) points *300 yuan/point *10 = 50/kloc-0. On the contrary, if the stock market rises, the total market value of the stock portfolio will also increase, but with the corresponding increase in the price of stock index futures, investors' short positions in the stock index futures market will suffer losses, basically offsetting the profits in the stock market.

What investors need to be reminded is that in actual transactions, it is often difficult to achieve complete hedging with exactly the same profit and loss. First, due to the standardization of futures contracts, it is difficult for hedgers to choose the desired quantity and delivery date according to actual needs; Second, due to the influence of basis risk.

What is basis difference? What is the impact on hedging?

Theoretically, the futures price is the market's forecast of the future spot market price, and there is a close relationship between them. Due to the similarity of influencing factors, futures prices and spot prices often show a relationship of ups and downs; However, the influencing factors are not exactly the same, so the changes of the two are not completely consistent, and the relationship between spot price and futures price can be described by basis. Basis is the difference between the spot price of a commodity in a specific place and the price of a specific futures contract of the same commodity, that is, basis = spot price-futures price. The basis is sometimes positive (called the inverse market) and sometimes negative (called the positive market). Therefore, the basis is a dynamic indicator of the actual operation change between the futures price and the spot price.

The change of basis directly affects the effect of hedging. From the principle of hedging, it is not difficult to see that hedging actually replaces the risk of price fluctuation in the spot market with basis risk. Therefore, in theory, it is possible to achieve complete hedging if the basis remains unchanged at the beginning and end of hedging. Therefore, the hedger should pay close attention to the change of basis and choose favorable opportunity to complete the transaction.

At the same time, the fluctuation of basis is relatively stable than that of futures price and spot price, which provides favorable conditions for hedging transactions; Moreover, the change of basis is mainly controlled by holding cost, which is much more convenient than directly observing the change of futures price or spot price.

What principles should stock index futures hedge generally follow?

(1) same or similar variety principle

This principle requires investors to choose the same or as close as possible to the spot variety to be hedged when hedging; Only in this way can the consistency of price trends between the spot market and the futures market be guaranteed to the greatest extent.

(2) the principle of the same or similar month

This principle requires investors to choose the delivery month of futures contracts and the proposed trading time in the spot market as much as possible when hedging.

(3) the opposite principle

This principle requires investors to buy and sell in the spot market and futures market in opposite directions when implementing hedging operations. Because the price trends of the same (similar) commodity in the two markets are in the same direction, it is bound to make a profit in one market and lose money in the other market, thus achieving the purpose of maintaining value.

(4) the principle of equivalence

This principle requires that when investors hedge, the number of commodities specified in the contract of the selected futures varieties must be equivalent to the number of commodities to be hedged in the spot market; Only in this way can the profit (loss) of one market be equal to or close to the loss (profit) of another market, thus improving the hedging effect.

Futures arbitrage of stock index futures and its function?

The theoretical price of stock index futures can be determined by no-arbitrage model. Once the market price deviates from a certain price range of this theoretical price (that is, the no-arbitrage range when considering the transaction cost), investors can make profits by buying low and selling high in the futures market and the spot market, which is the futures arbitrage of stock index futures. That is to say, in the stock market and stock index futures market, when the prices of the two markets are inconsistent to a certain extent, it is possible to make profits by trading in both markets at the same time.

For example. If the price of stock index futures is greatly overvalued, for example, a stock index is 1200 at a certain moment on May 8, and the corresponding stock index futures price due at the end of May is 1250, then the arbitrageur can borrow1200,000 yuan to buy a basket of stocks corresponding to the spot index. At the same time, sell three stock index futures at the price of 1250 points (assuming each contract) until the end of May. When the stock index futures contract expires, the stock index has fallen to 1 100 points, so the spot stock loss of the arbitrageur is 120000. Assuming that the settlement price of stock index futures adopts the spot index price, that is/. Then three stock index futures contracts can make a profit (1250-1100) * 3 * 300 =135,000 yuan. If the loan interest is 5000 yuan, then the arbitrageur can make a profit of 30000 yuan.

Spot arbitrage is very important for the stock index futures market. On the one hand, it is precisely because of the arbitrage between stock index futures and the stock market that the price of stock index futures will not be divorced from the spot price of stock index and there will be outrageous prices. Spot arbitrage makes the stock index price more reasonable and can better reflect the trend of the stock market. On the other hand, arbitrage helps to improve the liquidity of the stock index futures market. The existence of arbitrage behavior not only increases the trading volume of stock index futures market, but also increases the trading volume of stock market. The improvement of market liquidity is conducive to investors' smooth trading and hedging operations.

What are the basic requirements for speculative risk management of stock index futures?

The so-called speculation refers to the trading behavior that investors make profits by "buying when they are bullish and selling when they are bearish" according to their own predictions on the price change trend of the stock index futures market. Speculators take the risk of hedging in stock index futures trading, and speculative trading enhances market liquidity. Speculators should at least pay attention to the following five points in risk management:

(1) accurately predict the price changes of stock index futures and grasp the trend;

(2) Determine the stop loss point according to its own risk tolerance and strictly implement it;

(3) Expect enough profit targets and avoid greed;

(4) Try to choose the contract transactions in recent months to avoid liquidity risks;

(5) As speculative opportunities are fleeting and the market situation is ever-changing, fund management is very important.

Speculation requires knowledge, experience and risk management ability, and ordinary investors need to be cautious.