1. Selection of futures contracts: The key to hedging lies in the correlation between futures and spot prices. The higher the correlation between them, the smaller the basis risk and the better the hedging effect. Therefore, when choosing futures contracts, the closer the relationship with spot commodities, the better. In other words, when choosing futures contracts, hedgers should choose contracts with smaller basis.

2. Choice of expiration month of futures contract: When the hedger is not sure when to dispose of the spot, or when the time for the hedger to dispose of the spot is not exactly the same as the expiration month of the futures contract, the hedger usually has two choices at this time: (1) Select the futures contract in the latest month, then reverse the position before the expiration of this contract, then convert it into a futures contract in the next expiration month, and so on, until the processing is completed. (2) Choose a contract that is close to the spot time that may be processed, but the expiration month is far away, without too many futures contract conversions.

3. Timing of entering the market for hedging: The timing of entering the market for hedging refers to the question of when to enter the market to buy and sell futures and the number of transactions. If the goal of hedging is to maximize utility (or profit), then he does not need to hold futures contracts at any time, but only needs to enter the market to write off when he thinks the market trend will be unfavorable to him. This kind of hedging is generally called selective hedging.