The type of futures entry hedging (buy hedging) is that the hedger first buys a futures contract and holds a long position to protect his short position in the spot market to avoid the risk of price increase, which is usually adopted by processors, producers and operators.
If a spot trader owns or will own a commodity in the spot market, he can hedge it by selling the same number of commodity contracts in the futures market. Selling hedging allows spot traders to lock in profits. During the period of commodity holding, if the commodity price falls, the commodity holder will lose money in the spot market. However, when he sells the futures contract of the commodity in the futures market, then he can profit from the decline in futures prices, thus making up for the losses in the spot market. Break-even makes the net price of goods held by spot merchants very close to the original value of goods. For example, farmers sell soybean futures in advance before soybean harvest and conduct hedging transactions.
If a spot dealer is short of commodities now and wants to buy such commodities in the future, he can buy and hedge them in the futures market. Buying hedging is adopted by spot traders who want to buy a commodity in the future, but want to avoid possible price increases. If the price goes up, he will buy the goods in the spot market and pay more, but at the same time he can make money in the futures market and offset the losses in the spot market. For example, feed enterprises will buy feed raw material soybean meal in the future, and they can buy soybean meal futures in advance to hedge. Replace future purchases in the spot market with buying positions in the futures market.
Of course, the hedging transaction prevents the possible losses caused by the reverse price movement, and the hedger also loses the possibility of unexpected gains caused by the positive price movement.
In theory, hedging provides ideal price protection for spot traders, but in real life, this protection is not necessarily perfect. Many factors, such as basis, often affect the effect of hedging transactions. Let's analyze it in detail.
Futures introduction manual
Futures contract: a standardized contract made by the exchange to deliver a certain amount of subject matter at a specific time and place in the future.
Bear market: a market with falling prices.
Bull market: a market with rising prices.
Arbitrage: A trading technique, that is, buying spot or futures commodities in one market and selling the same or similar commodities in another market at the same time, and profiting from the difference between the two transactions, is called cross-market arbitrage. In addition, there are intertemporal arbitrage and current arbitrage.
Speculation: to take risks in buying and selling for a large profit, not to hedge or invest.
Margin: the funds paid by futures traders for settlement and performance guarantee according to the prescribed standards, which is generally 65,438+00% of the contract value? 15%。 Exchanges and futures companies have the right to adjust the margin collection ratio.
Opening price: The closing price generated by call auction within five minutes before the opening of a futures contract. If there is no transaction price in call auction, the opening price is the first transaction price after call auction.
Opening call auction: It shall be conducted within 5 minutes before the opening of a contract in a certain month of each trading day, in which the first 4 minutes are the declaration time of futures contract orders, and the last 1 minute is the call auction matchmaking time, and the opening price is generated at the opening.
Closing price: the last trading price of a futures contract on the same day.
Settlement price: the weighted average price of the transaction price of the futures contract on the same day according to the volume. If there is no transaction on that day, the settlement price of the previous trading day is the settlement price of that day.
Minimum price change: the minimum price change of the contract.
Open contracts: the bilateral number of open contracts held by futures traders.
Open position: a trader newly buys or sells a certain number of futures contracts, also known as? Open a position? . Unlike the stock market, futures are two-way transactions, which can be bought or sold first. A position held after buying a futures contract becomes a long position. Bull? . A position held after selling a futures contract becomes a short position. Short? .
Closing positions: after opening positions, investors can choose to write off the original futures contracts with the same variety, the same quantity, the delivery month and the opposite direction before the contract expires, thus completing futures trading. Futures is a T+0 trading method, and you can close your position at any time during the day.
Compulsory liquidation: When an investor violates the futures brokerage contract and the relevant business regulations of the Exchange, the Exchange and its members will take compulsory liquidation measures for the relevant contract positions held in violation of regulations.