The whole process of futures trading can be summarized as opening positions, holding positions, closing positions or physical delivery.
Opening a position means that a trader newly buys or sells a certain number of futures contracts. For example, you can sell 10 soybean futures contracts. When this transaction is your first transaction, it is called opening a position. In the futures market, buying and selling a futures contract is equivalent to signing a forward delivery contract. Contracts that are not open after opening positions are called opening contracts or closing contracts, also known as positions. When opening a position, the position held after buying a futures contract is called a long position, referred to as a long position; The positions held after selling futures contracts are called short positions, referred to as short positions.
If the trader keeps the futures contract until the end of the last trading day, he must settle the futures transaction through physical delivery. However, only a few people make physical delivery. About 99% market participants choose to sell the futures contracts they bought or buy back the futures contracts they sold before the end of the last trading day, that is, hedge the original futures contracts through the same number of futures transactions in opposite directions, so as to settle the futures transactions and relieve the obligation of physical delivery at maturity. For example, if you sold 65,438+00 lots of soybean contracts in May 2000, you should buy 65,438+00 lots of the same contract to hedge your position before the contract expires in May 2000. In this way, a transaction is over as soon as it is even. It's just like financial accounting. Once the same amount of money goes in and out, the account will be balanced. This behavior of buying back a sold contract or selling a bought contract is called liquidation. After opening the position, traders can choose two ways to close the futures contract: either choose the opportunity to close the position or reserve it for physical delivery on the last trading day.
Futures traders may gain or lose money when buying and selling futures contracts. So, from the perspective of traders themselves, what kind of transactions are profitable? What kind of transaction is a loss? Please look at an example. For example, you choose to buy and sell soybeans 1 contracts. You sell the 1 hand soybean contract for delivery in May next year at the price of 2 188 yuan/ton. At this time, your trading position is called "short position" Now you can say that you are a "short seller" or that you are shorting the 1 hand soybean contract.
When you become a bear, you have two choices. One is to keep short positions until the contract expires. At the time of delivery, you buy 10 tons of soybeans in the spot market and submit them to the buyer of the contract. If you can buy soybeans at a price lower than 2 188 yuan/ton, you can make a profit after delivery; On the contrary, if you buy at a price higher than 2 188 yuan/ton, you will lose money. For example, if you spend 2238 yuan/ton on soybean delivery, then you will lose 500 yuan (excluding transaction and delivery costs).
As a short position, your other option is to hedge your position when the soybean futures price is favorable to you. In other words, if you are a seller (short), you can buy the same contract, become a buyer and close your position. If this confuses you, you can think about what you did when the contract expired: you bought soybeans from the spot market to make up for the short position and submitted them to the buyer of the contract, which is essentially the same. If you are short and long at the same time, the two cancel each other out, and you can leave the futures market. If you take 2 188 yuan/ton as a short position and 2058 yuan/ton as a long position to repurchase the original selling contract, then you can earn 1300 yuan (excluding transaction costs).