What does hedging mean? Hedging transaction refers to the transaction of buying and selling the same commodity in the spot market and the futures market in the same quantity but in the opposite direction, or constructing different combinations to avoid the losses caused by future price changes.

Hedging transaction refers to the transaction activities in which an enterprise designates one or more hedging instruments to avoid foreign exchange risk, interest rate risk, commodity price risk, stock price risk and credit risk. And change the fair value or cash flow of the hedging instrument, and it is expected to offset all or part of the risks of changes in the fair value or cash flow of the hedging item.

The reason why hedging means something is the same in all markets. Futures hedging transaction refers to the reverse purchase (or sale) of futures contracts of similar commodities in the futures market, so that no matter how the price of the spot supply market fluctuates, it can finally make a profit in another market, and at the same time lose money in one market, and the amount of loss is roughly equal to the amount of profit, thus achieving the purpose of avoiding risks.

Because hedging transactions are based on the risks brought by the actual or expected price changes of foreign currency assets of traders, there are two kinds of hedging transactions: one is to hedge the existing spot positions; The second is to maintain the value of recent spot positions.

Hedging transaction refers to the trading activities in which the futures market is used as a place to transfer the price risk, the futures contract is used as a temporary substitute for buying and selling commodities in the spot market in the future, and the commodities are sold now or the prices of commodities to be bought in the future are insured.

The specific operation principle of hedging is that the contract price of futures in different months is different. Usually, the far-month contract rises sharply, the near-month contract rises slightly, and falls sharply when it falls.

According to the principle that both long futures and short futures can be profitable. We can do this: buy more contracts in a distant month and sell short in recent months. In this way, hedging occurs. The contract in the distant month rose by 80 points, with a profit of 800, while the contract in the recent month rose by 60 points and lost 600. The profit after hedging is "ignoring commission". In fact, at this time, you can also choose to leave at a profit.

Hedging means that the price trend of a futures product will rise for a long time, so this operation mode can be adopted. or vice versa, Dallas to the auditorium

Futures hedging can be divided into long hedging and short hedging.

Forward hedging in futures hedging: a futures trading mode in which traders buy futures in the futures market first, so that they will not suffer economic losses because of price increase when they buy them in the spot market later. So it is also called "long hedging" or "short hedging".

Futures hedging short hedging: also known as selling hedging, refers to a futures trading mode 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-term hedging is a trading method, that is, selling contracts equivalent to the spot quantity in the futures market to prevent the spot price from falling at the time of delivery. Hold short positions to protect the spot that traders will sell in the spot market. Therefore, selling hedging is also called "short selling hedging" or "selling hedging".

Seeing this, everyone should know the principle and operation of futures hedging. Want to know more about investment knowledge, please pay attention to us!