The principle of stock index futures hedging is that stock index futures hedging is the same as other futures hedging, and its basic principle is to use the similar trend between stock index futures and stock spot to manage the position risk in the spot market through corresponding operations in the futures market. Due to the arbitrage operation of stock index futures, the trend between the price of stock index futures and the stock spot (stock index) is basically the same. If the pace of the two is inconsistent, it will lead to arbitrage. Then, if the hedger holds a basket of stock spot, he thinks that the current stock market may fall, but if he sells the stock directly, his cost will be high, so he can establish a short position in the stock index futures market. When the stock market falls, stock index futures can make a profit. This is the so-called short hedging. The rise and fall of the index is (basically) consistent with the trend of the selected stock portfolio to be preserved, but the difficulty lies in determining the correlation between the stock portfolio (that is, the number of stocks) and the index (that is, the β coefficient).

Another basic hedging strategy is the so-called long hedging. An investor expects to have some money to invest in the stock market in a few months, but he thinks the current stock market is very attractive. If he has to wait a few months, he may miss the opportunity to open a position, so he can establish a long position in stock index futures first. In the future, when the funds are in place, the stock market will indeed rise and the cost of opening positions will increase. However, the income from closing stock index futures can make up for the increase in spot costs, so investors lock in the cost of the spot market through stock index futures.

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