Hedging refers to buying and selling the same amount of futures in the spot and futures markets at the same time, that is, selling or buying the same amount of futures in the futures market while buying or selling the spot. After a period of time, when the price changes make the spot trading profit or loss, the losses in the futures trading can be offset or compensated.
It is mainly an act that market investors temporarily replace physical transactions in futures trading in order to avoid or reduce the losses when the price is unfavorable to them. It can be divided into two ways: buying and selling, sometimes called long hedging and short hedging, and this article is called long hedging. Mainly refers to the trading investors in the market to buy some futures in the market first, and then use these futures to make up for the economic losses caused by the possible price increase when buying spot in the spot market in the future. Simply put, his purpose is to prevent the risk of loss caused by rising prices.