With the further integration of China's economy with the world economy, the fluctuation of domestic commodity prices has become more and more closely linked with the world. Especially since last year, the huge fluctuation of raw material commodity prices has caused great risks to the production and operation of related enterprises. At the same time, the domestic futures market has also seen a historic breakthrough and development, and the demand for enterprises to participate in futures hedging is becoming more and more urgent. In fact, more and more enterprises have begun to actively participate in the futures market for hedging operations. Hedging can be divided into traditional hedging and strategic hedging. Traditional hedging has great limitations, and this method does not make full use of the real hedging scheme of enterprises. Strategic hedging is relatively flexible and practical. This paper will explain how enterprises should participate in futures hedging business from the following aspects.

First of all, we must clarify the role of hedging in enterprises.

Enterprises must clarify the role of hedging in the production and operation of enterprises, and only in this way can hedging be positioned reasonably and accurately; Only by determining the position of hedging in the production and operation of enterprises can hedging truly become a normal link in the whole production and operation of enterprises, and hedging can truly be operable in enterprises.

Simply put, hedging is equivalent to buying insurance for enterprises, so what insurance should enterprises buy? It is equivalent to buying insurance for the raw materials and finished products of the enterprise. The bigger the enterprise, the more it needs this kind of insurance, and the greater the price fluctuation of raw materials or finished products, the more it needs this kind of insurance. The futures market is established for enterprises to transfer and avoid price risks, and enterprises participate in the futures market to transfer and sell risks, which is the positioning of hedging in the production and operation of enterprises.

For enterprises, the futures market is a risk management tool (and remember, it is a tool, not a spot wholesale market). When many enterprises mention hedging, they think it is necessary to pay cash or receive cash. In fact, most hedging operations are ended by hedging, that is, we end our futures contract by doing a transaction in the opposite direction to the original transaction in the futures market. We only use futures as a tool to serve the spot, not the spot wholesale market, and enterprises must be clear about this.

Two. Define the criteria for successful hedging.

Indeed, we must have a clear standard to judge whether our hedging operation is successful or not. Blind hedging is not always beneficial to enterprises, and sometimes it even brings extra losses, such as last year's big bull market. If you simply sell hedging, you will lose a good profit opportunity. So, how to judge whether hedging is successful or not?

For raw material buyers, the standard of successful hedging is whether your raw material purchase price is lower than the market average price. Only when the purchase price of raw materials is lower than the average market price can you say that your hedging operation is successful. If your purchase price of raw materials is higher than the average market price through hedging operation, your hedging operation will definitely fail. The lower the purchase price is than the average price, the more successful the hedging will be, otherwise it will fail. We can do this through good planning and comprehensive hedging programs.

For the seller of finished products, that is, selling hedging, the criterion for judging success is whether the price of your goods is higher than the average market price. Only when it is higher than the average market price can you say that your hedging is successful, and when it is lower than the average market price, it means that hedging fails.

Through this standard, we should realize that for hedging, we may not be able to completely guarantee that the enterprise will be profitable under any circumstances, but as long as we are higher than the average market price-for the seller, or lower than it-for the buyer, we are successful, because you are already in a favorable competitive position in the industry. So sometimes when the market situation is extremely bad, even if you lose money, you have to hedge, because this can minimize your own losses. In this case, reducing losses is the purpose of our hedging. Enterprises should pay special attention to this.

The buyer's buying price is lower than the average market price, and the seller's selling price is higher than the average market price. Who will contribute the intermediate price? Of course, it is a market speculator, which is the advantage of enterprises participating in hedging, that is, speculators will take risks for you, which is the fundamental reason why hedging is helpful to enterprises.

Third, the enterprise hedging operation strategy

1. The analysis of market hedging operation is by no means simply buying the spot and selling it in the futures market immediately, nor buying the spot on the forward contract in the futures market immediately in the future. The most critical factor for the success of hedging operation is to analyze the market. Only through market analysis can we evaluate what state the market is in, whether it is long or short, or a balanced position. Only by confirming the market state can we form a corresponding hedging strategy, whether to buy or sell, or not to enter the market for the time being. Analyzing the market does not mean speculation. The key to distinguish between speculation and hedging is whether there is a corresponding spot or demand for future positions, not whether to conduct market analysis. As long as there is a corresponding spot or demand in future positions, our futures trading is a hedging transaction. In a bull market, such as last year's cotton market, we should buy as many hedges as possible and try to control the sale of hedging, while in a bear market, the opposite is true.

2. After analyzing the market, look for our concerns. If you are worried about rising prices, you plan to consider buying hedging; If we are worried about falling prices, we plan to consider hedging by selling them. If we don't worry, that is, the market price is in equilibrium, then we don't need to enter the market to do hedging transactions.

3. Hedging operation only needs to pay attention to the direction and trend of price operation, and does not need to pay too much attention to the daily fluctuation of price. Because for hedging, what we are worried about is that the trend of market price is unfavorable to us, not the daily price fluctuation. Market prices fluctuate up and down every day. If we pay too much attention to this intraday fluctuation, it will be difficult for us to implement the hedging plan.

4. Hedging transaction is best solved by hedging. Unless there is a big deviation between the futures price and the spot price, physical delivery is adopted. Because if the futures contract is close to the spot price when it expires, we don't need to receive or sell the spot in the futures market, but we can settle our future position through hedging, which can not only save the delivery procedure, but also affect the relationship between the spot business partners. Of course, if the futures price deviates from the spot price, delivery is a good choice. Because either you can sell a price higher than the spot price in the futures market, or you can buy a price lower than the spot price in the futures market.

5. Always keep the position corresponding to the future position. For example, you plan to need a certain amount of cash at some time in the future. If you think that the future price increase is more likely through analysis, you can buy a considerable number of future positions in the futures market first. When a batch of your spot comes in, you must reduce your corresponding futures positions at the same time, that is, spot and futures hedging, and always keep the futures positions below the spot demand. Only in this way can you avoid hedging operations becoming speculative operations. The conversion of hedging into speculation is a taboo for all hedging businesses, and enterprises must avoid this phenomenon, because many cases in history are telling us how harmful it is.

In short, for enterprise hedging, first of all, you must give hedging a clear positioning, understand the position of hedging in the production and operation of enterprises, and regard hedging as a normal link in the production and operation of enterprises; Secondly, by analyzing the market, the direction and demand of hedging are determined; Furthermore, strictly avoid the hedging business from becoming speculation. To achieve the above three points, it is best for enterprises to set up a hedging department to operate, and enterprise leaders will monitor the hedging business. Only in this way can the hedging operation really protect the enterprise and play an insurance role for the enterprise.