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.
Brief introduction to stock trading and exchange fund futures.
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. Www.rumen8.com stock exchange and fund introduction.
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. Introduction to stock trading
What is the "hedging" of hedge funds?
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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.
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He divided the risk in stock investment into two categories: the risk from individual stock selection and the risk from the whole market, and tried to separate the two risks. He used some assets to maintain a basket of short stocks as a means to offset the decline in the overall market level. On the premise of controlling the market risk to a certain extent, he also used the leverage effect to amplify the gains from his stock selection. The strategy is to buy specific.
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