Hedging can also widen the spread. The bull market reversal is of course the spread amplification. Usually, when commodity prices rise in a bull market, the long-term expected increase becomes smaller and the price difference becomes smaller. Conversely, of course, when the price difference becomes smaller, the bull market will become bigger and shorter, which will easily lead to price difference changes and profits.
Forward market means that the futures price is higher than the spot price at that time or the forward contract price is higher than the recent contract price.
Bull market hedging is actually to buy the latest contract and sell the forward futures contract at the same time, thus narrowing the basic gap and realizing profit.
Reverse market, reverse operation.
Bull market hedging refers to the hedging method of buying the latest delivery monthly contract and selling the forward delivery monthly contract, also known as forward hedging.
Bear market hedging refers to the hedging method of selling the latest handover month contract and buying the forward handover month contract, also known as anti-hedging. In fact, the definition of bull market hedging is problematic. If you really know it's a bull market, buy in large quantities. It may be better to be short of cash. At this time, because the premium of the nearest moon is better than that of the distant moon, you can make a profit by buying close-range transactions.
Bull market hedging can be subdivided into
delta hedge
There is no risk hedging opportunity in the forward market. When the absolute value of the spread is greater than the cost of the position, many contracts can be signed in the latest month and empty contracts in the same warehouse can be signed in the next month. If the prices are different, you can hedge your position in the futures market and make a profit. If the handover month hasn't come back, we can receive the warehouse invoice in the latest month, and we can close the position with the warehouse invoice when it expires one month away. To obtain risk-free returns, risk-free hedging should pay attention to two points. One is the cancellation factor of warehouse receipt, and the other is the value-added tax risk, which will be specifically hedged later, so I will not explain it here.
Hedging logic hedging
If the market is short of supply and the demand is relatively strong, then the price of the contract in recent months will increase more than that of the contract in long months, or the price of the contract in recent months will decrease less than that of the contract in long months, so the contract in recent months can do a lot of things, and empty orders with the same position can be hedged in far months.