Futures hedging
Long hedging: a futures trading method in which traders buy futures in the futures market first to avoid causing economic losses to themselves when buying in the spot market in the future. Therefore, it is also called "long hedging" or "short hedging".
Short hedging: also known as selling hedging, refers to a futures trading method in which traders sell futures in the futures market first, and when the spot price falls, the profit in the futures market makes up for the loss in the spot market, thus realizing the value preservation. Short hedging is a trading method to sell contracts equivalent to the spot quantity in the futures market in order to prevent the risk of spot price falling during delivery. Hold short positions to hedge the spot that traders will sell in the spot market. Therefore, selling hedging is also called "short selling hedging" or "selling hedging".
Futures hedging method
1. Selling hedging of producers: As a supplier of social goods, whether it is a farmer who provides agricultural and sideline products to the market or an enterprise that provides basic raw materials such as copper, tin, lead and oil, in order to ensure that the goods that have been produced or will be sold to the market in the future get reasonable economic profits in the production process and prevent them from suffering losses due to price decline when they are officially sold, they can adopt selling hedging to reduce the price risk, that is.
2. The operator sells hedging: For the operator, the market risk he faces is that the price of the goods falls after purchase but is not resold, which will reduce his operating profit and even cause losses. In order to avoid this market risk, operators can use the method of selling hedging to carry out price insurance.
3. Comprehensive hedging of processors: for processors, market risk comes from buying and selling; He is worried about rising raw material prices and falling finished product prices, and even more afraid of rising raw material and finished product prices. As long as the materials and finished products that the processor needs can be traded in the futures market, he can use the futures market for comprehensive hedging, that is, buying the purchased raw materials and selling the products, which can relieve his worries and lock in his processing profits, thus specializing in processing and production.