Question 2: What does futures hedging mean? hello
Futures hedging: In finance, hedging means that one investment deliberately reduces the risk of another investment.
Futures hedging is a way to reduce business risks while still making profits from investment. General hedging is to conduct two transactions at the same time, both related to the market, in the opposite direction, with the same amount and breakeven.
Question 3: There is the concept of hedging in futures. What does this mean and how does it work? Sorry, I'm confused.
Miow_doll's answer is apt and concise.
I'll rearrange it now
hedging
1.
It can be defined as: hedging transaction refers to buying and selling a contract with the same quantity, the same variety but different terms in the forward market of futures options in order to achieve the purpose of arbitrage or risk avoidance.
From the microscopic point of view, hedging is a means of operation, which is simply buying and selling. For example, if you buy a soybean contract in March and sell a soybean contract in April in the futures market, the purpose is to avoid the risk of market fluctuation, or if you want to sell a batch of goods in the future, you can buy a batch of futures to hedge the risk of spot market fluctuation, which is called hedging.
If the scope is expanded a little, give an inappropriate example. Personally, I think insurance can also be regarded as a hedge against the loss of your life or property.
I think the purpose of hedging is not to make a profit, but to reduce the risk caused by the fluctuation of futures prices. The purpose is to preserve value. Its cost is only the procedure of buying futures, which is much smaller than the loss caused by the risk of price fluctuation. Therefore, hedging is a very common method to avoid risks.
2.
There are many kinds of hedging:
This is a two-way operation. Economic hedging is to achieve the purpose of hedging. Hedging in import and export trade means that importers and exporters buy foreign currency in the foreign exchange market in order to avoid direct or indirect economic losses caused by foreign currency appreciation, and the purchase amount is equivalent to the foreign currency they need to pay for imported goods; Hedging in futures means that customers buy (sell) a futures contract and then sell (buy) a futures contract with the same amount as the original variety in the delivery month to offset the delivery of spot. Its main point is that the months are the same, the directions are opposite, and the amount is the same.
3.
What is "hedging" and why should it be hedged?
Hedging is also translated as hedging, hedging, support, top risk, hedging and hedging transactions. Pre-hedging refers to "the trading method of offsetting the price risk in spot market transactions by conducting the same kind and quantity of contracts in the futures market but with opposite trading positions" (edited by Liu Hongru, 1995).
Early hedging was used in agricultural products market and foreign exchange market for real value preservation. Hedgers are generally actual producers and consumers, or people who own goods for sale in the future, or people who need to buy goods in the future, or people who collect debts in the future, or people who repay debts in the future, and so on.
These people face the risk of suffering losses due to changes in commodity prices and currency prices. Hedging is a financial operation to avoid risks. The purpose is to avoid exposure risks in the form of futures or options, so that their portfolios are not exposed.
For example, a French exporter knows that he will receive $6,543,800+when he exports a batch of cars to the United States three months later, but he doesn't know what the exchange rate of US dollars to French francs is after three months. If the dollar falls sharply, he will suffer losses. In order to avoid risks, we can short the same amount of dollars in the futures market (payment after three months), that is, lock the exchange rate, so as to avoid the risks brought by exchange rate uncertainty. Hedging can be short selling or short selling.
If you already own an asset and plan to sell it in the future, you can lock in the price by shorting the asset. If you want to buy an asset in the future and are worried about its rising price, you can buy the futures of this asset now.
Because the essence of the problem here is the difference between the futures price and the spot price due in the future, no one will really deliver this asset, but the difference between the futures price and the spot price due. In this sense, the sale of this asset is short selling and short selling.
So what is the "hedging" of hedge funds? Take Jones, the originator of hedge funds. Jones realized that hedging is a market-neutral strategy. By establishing long positions in undervalued securities and short positions in other securities, investment capital can be effectively increased and limited resources can be used for block trading.
At that time, two investment tools widely used in the market were short selling and leverage effect. Jones combined these two investment tools to create a new investment system. He divided the risks in stock investment into two categories: from stock selection ... >>
Question 4: What is futures hedging? Hedging transaction is to conduct two market-related transactions at the same time, in opposite directions, with the same amount, and break even. Market correlation refers to the identity of market supply and demand that affects the prices of two commodities. If the relationship between supply and demand changes, it will affect the prices of two commodities at the same time, and the prices will change in the same direction. The opposite direction means that the buying and selling directions of two transactions are opposite, so that no matter which direction the price changes, there is always a profit and a loss. Of course, in order to protect the capital, the number of two transactions must be determined according to the range of their respective price changes, so that the number is roughly the same. In the market economy, there are many kinds of transactions that can be hedged, such as foreign exchange hedging and option hedging, but futures trading is the most suitable one. First of all, because the futures trading adopts the margin system, the transaction of the same size only needs to invest less money, so the cost of doing two transactions at the same time has not increased much. Secondly, futures can be sold short, and virtual hedging of contract liquidation and real hedging of physical delivery can be done. The conditions for completing the transaction are flexible, so the hedging transaction developed rapidly after the birth of futures, a financial derivative. The English-Chinese Dictionary of Securities Investment by the Commercial Press explains: hedging transactions. Also known as carry trade. Name. Trading measures taken to avoid investment losses of financial products. The most basic way is to buy spot and sell futures or sell spot and buy futures, which is widely used in the fields of stocks, foreign exchange and futures. The original intention of hedging or arbitrage trading is to reduce the risk of market fluctuation to investment varieties and lock in the existing investment results, but many professional investment managers and companies use it for speculative profits. Simply hedging speculation is very risky. The other is: hedging. The following takes futures hedging as an example to illustrate its operation method. There are roughly four kinds of hedging transactions in the futures market. One is the hedging transaction between futures and spot, that is, trading in the futures market and spot market with the same number and opposite directions at the same time. This is the most basic form of futures hedging transaction, which is obviously different from other hedging transactions. First of all, this hedging transaction is not only conducted in the futures market, but also in the spot market, while other hedging transactions are futures transactions. Secondly, this kind of hedging transaction is mainly to avoid the risks brought by price changes in the spot market and give up the possible benefits brought by price changes, which is generally called hedging. The purpose of several other hedging transactions is to carry out speculative arbitrage from price changes, which is usually called profit hedging. Of course, the hedging between futures and spot is not limited to hedging, and it is also possible to hedge when the price difference between futures and spot is too large or too small. Just because this hedging transaction needs spot trading, the cost is higher than that of simply doing futures, and some conditions are needed to do spot trading, so it is generally used for hedging. The second is the hedging transaction of the same futures product in different delivery months. Because the price changes with time, the spread of the same futures product in different delivery months forms a spread, and this spread also changes. Excluding the relatively fixed commodity storage cost, the price difference depends on the change of supply and demand. By buying futures varieties for delivery in one month and selling futures varieties for delivery in another month, you can close your position or deliver at a certain time. Due to the change of price difference, two transactions in opposite directions may generate income after breakeven. This kind of hedging transaction is called intertemporal arbitrage for short. Third, hedging transactions of the same futures product in different futures markets. Due to different geographical and institutional environments, the price of the same futures product in different markets at the same time is likely to be different and constantly changing. In this way, you can buy long positions in one market and sell short positions in another market at the same time, and then close positions or deliver at the same time after a period of time, thus completing hedging transactions in different markets. This kind of hedging transaction is called cross-market arbitrage. Fourth, hedging transactions of different futures varieties. The premise of this hedging transaction is that there is some correlation between different futures products, for example, the two commodities are upstream and downstream products, or they can replace each other. Although the varieties are different, they reflect the identity of market supply and demand.
Question 5: What is stock index futures hedging? The hedging strategy of stock index futures, also known as hedging, refers to an investment strategy to avoid the systemic risk of stock trading by establishing a stock index future positions that is opposite to the direction of stock trading.
Theoretically, stock index futures can hedge the systemic risk of the stock market because: first, the price trend of stock index futures and spot index is consistent; Second, stock index futures have a short-selling mechanism; Third, stock index futures have margin leverage mechanism, which can hedge the stock portfolio with several times the amount of funds with a small amount of funds, and the capital utilization efficiency is high.
This paper mainly talks about some practical experiences and feelings we have provided for customers with hedging needs since the listing of stock index futures. This reflects some specific difficulties in the application of hedging transactions in China market.
Question 6: How to hedge futures? I don't understand 1: If 1 US dollar is converted into 2 francs at present, then 1 10,000 US dollars can be converted into 2 million francs. Three months later, if the dollar falls, now one dollar can only be exchanged for 1.5 francs, so the obvious exporters are less than 500,000 francs. Is that understandable? So how to avoid it? The exporter then shorted $6,543,800+0,000 against the franc in the futures market (that is, shorted $6,543,800+0,000 and paid with 2 million francs). Three months later, the dollar in the futures market fell, and the same $ 654.38+0 could only be exchanged for 654.38+0.5 francs. Because the exporter is short, he has shorted $654.38+.
The loss in front was 500,000, and the futures market earned 500,000, which just offset it.
2. In the same way.
Question 7: What does selling hedging mean? Selling hedging is used to protect the future decline of stock portfolio price. Under this kind of hedging, when the hedger sells the futures contract, it can fix the future cash selling price and transfer the price risk from the holder of the stock portfolio to the buyer of the futures contract.
Question 8: What does it mean to buy a hedge? Buy hedging refers to the transaction in which commodity investors hedge the rise of commodity prices in futures contracts. In finance, hedging means that one investment deliberately reduces the risk of another investment. This is a way to reduce business risks while still making profits from investment. General hedging is to conduct two transactions at the same time, both related to the market, in the opposite direction, with the same amount and breakeven.
Question 9: There is a word in futures called "hedging". What does that mean? For example, one hand is more than one, and one hand is empty. This is hedging.
Question 10: Can you give an example of what is stock index futures hedging? If you buy almost all the constituent stocks of Shanghai and Shenzhen 300, when the stock market falls, if you can't sell (big money), you can empty the corresponding number of Shanghai and Shenzhen 300 stock index futures in the futures market. This hedges the risk of stock market decline, that is, the hedging of stock index futures. I hope it will help the landlord, thank you.