Generally, the regular short-selling market has a platform for third-party brokers to borrow goods. Generally speaking, it is similar to a credit transaction. This model can profit in the wave band of falling prices, that is, borrowing goods at a high level and selling them, and then buying and returning them after falling. So buying is still low, selling is still high, but the operating procedures are reversed.
Common functions of shorting include speculation, financing and hedging. Speculation refers to the expectation of future market decline, and then sell high and buy low to obtain the profit difference. Financing means shorting in the bond market and returning it in the future, which can be used as a way to borrow money. Hedging means that when the risk of assets in the hands of a trader is high, he can reduce his risk exposure by shorting risky assets.
Extended data
When investors conduct futures trading, they must pay a certain proportion of the value of the futures contracts they buy and sell as a guarantee for the performance of futures contracts, and then they can participate in futures contract trading. This money is usually called a deposit.
In the "Notice on Listing and Trading of Shanghai and Shenzhen 300 Stock Index Futures Contracts", CICC stipulated that the margin of stock index futures contracts was 12%.
Because of the daily debt-free settlement system in the index futures market, arbitrageurs must bear the risk of daily margin changes. When the margin balance is lower than the maintenance margin, investors should make up to the original margin level before the next business day, and those who fail to make up will be forced to close their positions or reduce their positions at the market price at the opening.
If the investor's margin balance is lower than the maintenance margin calculated at the trading price of the day, the futures company has the right to execute compulsory liquidation or lightening.
If the arbitrageur's funds are not properly allocated, it may force the arbitrage position of stock index futures to be released ahead of schedule, leading to arbitrage failure. Therefore, some cash should be reserved for portfolio arbitrage to avoid the risk of margin increase.
Baidu encyclopedia-stock index futures