Long hedging: For example, some enterprises that use bulk commodities as raw materials, such as cotton spinning enterprises and non-ferrous metal processing industries, will buy raw materials for processing in the spot market in the future due to business needs, but the price fluctuation of these bulk raw materials is too large, which will bring great risks to their operations. For the purpose of hedging, they will buy in the futures market. When they need to buy raw materials in the spot market in the future, they will sell their futures and buy raw materials in the spot market. When the operation in the futures market brings profits to it, it can make up for its losses in the spot market and achieve the purpose of hedging, especially when it is bought for the first time in the futures market, we call it dragon. Such hedging is also a long hedging!

Short hedging: Contrary to long hedging, enterprises or individuals generally sell their own spot in the spot market. They will sell their spot in the spot market in the future. Similarly, in order to hedge, they now sell futures contracts in the futures market. We call it short. At some point in the future, when they need to sell their own spot in the spot market, they will buy the same number of futures contracts in the futures market, and use the profits of the futures market to make up for the possible losses in the future spot market. For example, COFCO, Chinalco and Baosteel are all short hedgers in the futures market!

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