Buy or sell commodity futures contracts with the same number of transactions in the spot market, but in the opposite direction, in order to hedge and close positions and settle the profits or losses brought by futures trading at a certain moment in the future, so as to compensate or offset the actual price risks or interests brought about by price changes in the spot market and stabilize the economic interests of traders at a certain level.

Hedging tools are

Hedging instruments, usually derivatives designated by enterprises, whose fair value or expected cash flow can offset the changes in the fair value and cash flow of the hedged items. Derivatives are usually considered as financial instruments held for trading or hedging, including options, futures, forward contracts, swaps and other commonly used varieties. Non-derivative financial assets or financial liabilities can only be designated as hedging instruments when they are used to hedge foreign exchange risks.

Say it in a popular way.

I bought a stock.

I certainly hope it will go up, so that I can make money.

But it may also fall.

Then I will buy a put option (equivalent to a hedging tool)

If he falls,

I can make money through hedging tools.

This will reduce the overall risk.

Of course, the overall income is also declining.