The relationship between hedging and cash conversion is 1. Hedging is the basis and guarantee of converting futures into cash. The participants in futures market hedging are the basis of the existence and development of futures market, and also the main spot suppliers and demanders in spot market. Only with the existence and participation of hedgers can futures be converted into spot. Taking the measure of converting futures into spot can make the futures market closer to the spot market. Generally speaking, the physical delivery of futures trading varieties plays an important role in strengthening the connection between the two markets. Without physical delivery, the futures market is like passive water. Although the physical delivery of general futures trading varieties only accounts for about 3% of its trading volume, this 3% physical delivery is a special hedging method and has become a link and bridge connecting the two markets. The measure of converting futures into cash will extend the delivery time from the delivery month of futures contracts to any time, so that both long and short parties have more time to complete the physical delivery, alleviate the market risk caused by the sharp rise or fall of futures trading prices, promote the mutual penetration and interweaving of the two market influencing factors, and guide futures investors to pay attention to spot trading. At the same time, hedging needs to be closed or delivered in kind, and the conversion of futures to spot is closely related to the transaction of spot or physical delivery due in the futures market, but there are essential differences. Different from buying and selling the spot after closing the position in the trading hall, futures cash is closed at the price agreed by the buyer and the seller, while the closing price of buying and selling the spot after closing the position in the trading hall can only be competitive. Cash transfer is also different from physical delivery. Buyers and sellers can deliver the goods in advance or in the month of delivery. The time, place and grade of delivery are agreed by both parties, while physical delivery can only be paid at the designated place when it expires. It can be seen that an important condition for cash conversion is that futures prices and spot prices remain within a reasonable price range. When the futures price seriously deviates from the current price, even if the cost factor is included, for one of the buyers and sellers, the income from cash conversion is still less than the income from spot or physical delivery after the trading hall closes, so it is impossible to carry out cash conversion during this period. In addition, the structure of futures market participants, whether there are many hedgers and spot trading partners, and whether the rules of futures cashing are convenient will affect the number of futures cashing. 2. Converting futures into cash is the development and extension of hedging theory. Converting futures into spot is a new hedging method and an innovation of hedging theory. The size of the agreed basis is the most important factor in converting futures into spot, and one of the hedging methods is basis trading. Therefore, the conversion of futures into spot is the development and extension of hedging theory. The following factors should be considered in the operation of hedging or converting futures into cash: related expenses of delivery, storage fees, interest fees, opportunity income from the use of funds and goods in the early stage, spot price and futures price, spot price difference between goods converted from futures to spot delivery and delivery standard grades, etc. Since the futures price already includes delivery, warehousing and interest, the futures price is generally higher than the current price, so the difference between the futures price and the current price is an important basis for determining the basis of the agreement. Generally speaking, when both parties close their positions according to the settlement price and deduct the settlement price from the agreed basis to determine the price of the delivered goods, the seller shall transfer most of the savings to the buyer in the form of the agreed basis. In the case that the spot price difference is basically the same as the above expenses, the agreed basis should be lower than the price difference between the futures market and the spot market. Because in this case, compared with the delivery method, the seller basically does not get the benefits of futures on the spot, and the buyer gets all the benefits of futures on the spot, so the possibility of futures on the spot between buyers and sellers is very small. In the case of less than the spot price difference, the small part is the profit obtained by the seller from converting futures into spot, and the agreed basis is the profit obtained by the buyer from converting futures into spot. 3. Hedging and futures conversion can be transformed into each other under certain conditions. (1) If the buyer and the seller are long-term trading partners and both want to deliver in the future and transfer the spot price risk, the buyer and the seller can first draw up the delivery location and delivery level, and then establish their own positions in the futures market. In this way, although the buyers and sellers did not sign forward contracts directly, they actually signed forward contracts indirectly through the futures market, converting futures into spot before the futures contracts expired or expired, and turning futures contracts into spot contracts. In the process of converting futures into cash, signing contracts indirectly through the futures market not only gives the party with unfavorable price changes the opportunity to close the position and avoid liability, but also enables the party with favorable price changes not to be unable to transfer the price risk because the other party is unwilling to perform the contract. If the buyer and seller do not close their positions before the futures contract expires, they can convert the futures contract into a spot contract. If one party has closed its position before the futures contract expires, the other party can choose a new partner to transfer the futures to the spot, buy and sell the spot after closing the position or deliver it at maturity, so as to achieve the purpose of preserving the value. Converting futures to spot provides a new way to connect futures market and spot market. Like futures contract trading and forward contract trading, futures-to-spot trading makes buyers and sellers transfer the price risk. At the same time, the futures-to-spot trading also absorbs the advantages of clearing exemption in futures trading and flexible, convenient and low-cost delivery of goods in forward contract trading, effectively preventing the price risk brought by default in forward contract trading and saving the costs and other expenses brought by futures delivery. (2) If the buyer and the seller are not trading partners in the spot, but accidentally reach an agreement on converting futures into spot before delivery or delivery, the spot delivery price and futures closing price are often agreed in the agreement, and of course the basis for converting futures into spot can also be agreed. If the negotiation fails, the existing future positions can be converted into a hedging position; In the case of reaching a consensus, the original hedging position can be converted into futures and spot. According to the information of foreign futures converting to spot, both sides of futures converting to spot are mostly trading partners. They use futures to exchange for spot for hedging, and at the same time agree on a price difference according to the futures price of a certain day to determine the spot delivery price. It can be seen that hedging and futures conversion can be said that you have me and I have you, which laid the foundation for the prosperity and development of the futures market.