Hedging is a financial term that 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.
Market correlation refers to the unity 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.
Hedging is the most common in the foreign exchange market, focusing on avoiding the risk of one-way trading. The so-called single-line trading means buying short positions (or short positions) when you are optimistic about a certain currency, and selling short positions (short positions) when you are bearish on a certain currency. If the judgment is correct, the profit will naturally be more; But if the judgment is wrong, the loss will be very large.
The so-called hedging is to buy a foreign currency at the same time and short it. Besides, we should also sell another currency, that is, short selling. In theory, shorting a currency and shorting a currency should be the same as the silver code, which is the real hedging, otherwise the hedging function cannot be realized if the two sides are different in size.
The so-called hedging settlement means that after traders open their positions in the futures market, they mostly end their transactions through hedging instead of delivery (that is, spot settlement). After buying and opening a position, you can cancel your obligation by selling the same futures contract; After selling and opening a position, you can cancel the performance responsibility by buying the same futures contract. Hedging makes it unnecessary for investors to close futures trading through delivery, thus improving the liquidity of futures market.
This is because the world foreign exchange market is based on US dollars. All foreign currencies rise and fall with the US dollar as the relative exchange rate. A strong dollar means a weak foreign currency; If the foreign currency is strong, the dollar will be weak. The rise and fall of the dollar affects the rise and fall of all foreign currencies. Therefore, if you are optimistic about a currency, but want to reduce the risk, you need to sell a bearish currency at the same time.
Buy strong currency and sell weak currency. If the estimate is correct, the dollar will weaken and the strong currency bought will rise. Even if the estimate is wrong and the dollar is strong, the currency bought will not fall too much. The weak currency sold has fallen sharply, with less losses and more gains, and it can still be profitable on the whole.
Purchase hedging, also known as "push hedging", is used to protect the future changes of stock portfolio price. Under this kind of hedging, the hedger buys futures contracts. For example, the fund manager predicts that the market will rise, so he wants to buy stocks; But if the funds used to buy stocks can't be put in place immediately, he can buy futures indexes, and when the funds are enough, he will sell futures to buy stocks, and the futures income will offset the cost of buying stocks at high prices.
Fund managers will receive investment funds regularly. Before receiving new investment funds, he predicted that there would be a "bull market" in the next few weeks. In this case, he can use the purchase hedge to fix the current price of the stock. If the Hang Seng Index futures due in four weeks are 4,000 points this month, and the fund manager expects to get 1 10,000 USD in three weeks, then he can buy 1 1,000,000 ÷ (4,000× 50 USD) = 5 contracts now.