The core of stock index futures hedging lies in insurance mechanism. When the stock market fluctuates greatly, hedging operation can ensure that investors will not suffer losses because of the stock market price drop. If investors have a large number of positions in the stock market, they can use stock index futures to reduce their own risks.
The hedging of stock index futures also provides an opportunity for stock traders to take advantage of the potential repeatability and volatility in the market to ensure the consistency of their portfolios. Investors can reduce risks in this way, and only need to use a small amount of investment funds in the process. It should be noted that stock index futures hedging is a professional trading method, which needs certain market experience and technical support to be successfully implemented.