1. The principle of hedging is that the same commodity will be influenced and restricted by the same economic factor at the same time and space under the condition that the spot market and the futures market coexist, so the price changes in the two markets are generally the same; Due to the existence of futures delivery mechanism, with the approach of futures contract delivery, spot prices and futures prices will tend to be consistent; A large number of spot arbitrage transactions based on cost pricing operation in the market ensure that futures and spot prices always fluctuate within a certain range. Hedging is to use this relationship between the two markets to take the same amount in the futures market but in the opposite direction, so as to establish a mutual offset mechanism in the two markets. No matter how the price changes, it can achieve the result of losing money in one market and making profits in another market at the same time. The final loss is roughly equal to the profit, and the two phases offset each other, thus transferring most of the risk of price changes. However, a large number of speculative participants in the futures market provided rich counterparties, created market liquidity and successfully realized the risk transfer function of the futures market. Hedging is divided into selling hedging and buying hedging.
2. Futures Hedging Case Hedging refers to buying or selling futures contracts with the same quantity but opposite direction in the futures market, and hedging and closing positions by selling or buying futures contracts at a certain time in the future, thus establishing a profit and loss hedging mechanism between the futures market and the spot market. The principle of hedging is: for the same commodity, when the spot market and the futures market coexist, they will be influenced and restricted by the same economic factors at the same time and space, so the price changes in the two markets are generally the same; Due to the existence of futures delivery mechanism, with the approach of futures contract delivery, spot prices and futures prices will tend to be consistent; A large number of spot arbitrage transactions based on cost pricing operation in the market ensure that futures and spot prices always fluctuate within a certain range. Hedging is to use this relationship between the two markets to take the same amount in the futures market but in the opposite direction, so as to establish a mutual offset mechanism in the two markets. No matter how the price changes, it can achieve the result of losing money in one market and making profits in another market at the same time. The final loss is roughly equal to the profit, and the two phases offset each other, thus transferring most of the risk of price changes. However, a large number of speculative participants in the futures market provided rich counterparties, created market liquidity and successfully realized the risk transfer function of the futures market.