Hedging refers to the trading activities in which an enterprise designates one or more hedging instruments to avoid foreign exchange risk, interest rate risk, commodity price risk, stock price risk and credit risk. , so that the fair value or cash flow of the hedging instrument changes, and it is expected to offset all or part of the fair value or cash flow change risk of the hedging item. In order to protect the income and lock in the cost in the process of currency conversion or exchange, the practice of avoiding the risk of exchange rate changes through foreign exchange derivative transactions is called hedging.

Theoretical basis of hedging: the trend of spot and futures markets is similar (under normal market conditions), because these two markets are affected by the same supply and demand relationship, and their prices rise and fall together; However, due to the opposite operation and profit and loss of these two markets, the profit of futures market can make up for the loss of spot market, or the appreciation of spot market is offset by the loss of futures market. The trading principles of hedging are as follows:

1, the principle that the transaction direction is opposite;

2, the principle of similar goods;

3, the principle of equal quantity of goods;

4. The principle of the same or similar month.

In fact, hedging in the futures market is a kind of venture capital behavior aimed at avoiding the risk of spot trading, and it is an operation combined with spot trading.