Take copper as an example. If you buy copper futures for 55,000 yuan, you will get a stable profit of 4,000 yuan no matter how the copper price rises. The premise of the above assumption is that copper prices rise, and you use futures to avoid the risk of rising raw materials. In other words, no matter how much the copper price rises, the money you earn from futures will be subsidized into profits.
If the copper price falls (assuming that your commodity price is still 59,000 when it falls to 50,000), your profit should have been 9,000, but if you lose 5,000 in futures, your profit will still be 4,000. In this way, although your income is less, you can still guarantee a stable income.
If the copper price is lower than 5000, you can consider selling futures copper and closing your position. In this way, although you lost 5000 yuan in the futures market, if the copper price falls to 40000, your commodity price is 55000, and your profit in the commodity market is 15000. If you deduct the futures loss of 5000 yuan, your profit will still be 10000 yuan.
Of course, futures are more complicated in actual operation, and the price decline curve of commodities is not clear when copper prices fall, but if you know what I mean, you can make a mathematical model to ensure that the income will always be greater than 4000.
Xiao Fei