What is the difference between hedging and hedging? Is hedging the same as hedging?

2023-06-05
Summary:

Hedging and hedging are two different concepts in finance. Learn about the key differences between the two and discover if they are the same or not.

The direct purpose of hedging is to avoid risks and make investment transactions more robust. However, for novice investors, the difference between hedging and hedging may not be clear. This article will provide you with a specific introduction to the difference between hedging and hedging.

What is the difference between hedging and hedging? Is hedging the same as hedging?

Hedging is called hedging and is generally done by enterprises. The spot goods that can achieve physical delivery and trading are the objects of hedging. Although the "position" can be "hedged" and closed in the futures market, the spot goods purchased or sold in the spot market are still the same or similar in quantity and month as those in the futures market. The risk hedging of hedging refers to the offsetting of the positive and negative price difference between the futures market and the spot market, in order to lock in the price of procurement costs or sales profits before rising or falling.


Hedge, in finance, refers to an investment that deliberately reduces the risk of another investment. It is a technique that can reduce business risks while still making profits from investments. General hedging is to conduct two transactions related to the market at the same time, in opposite directions, in the same amount, and with profits and losses offset. Market correlation refers to the identity of the market supply and demand relationship that affects the prices of two commodities. If the supply and demand relationship changes, it will also affect the prices of two commodities, and the direction of price changes is generally consistent. Opposite direction refers to the opposite buying and selling directions of two transactions, so that no matter what direction the price changes, there is always one profit and one loss. Of course, in order to achieve a balance between profits and losses, the quantity of two transactions must be determined based on the magnitude of their respective price changes, generally achieving a similar quantity.


What is the difference between hedging and hedging?

1. Different purposes: Firstly, it should be clarified that hedging and hedging are two different professional terms in the futures market. Hedging, abbreviated as hedging, refers to the use of the commonalities between the futures market and the spot market to achieve risk avoidance and stable returns.


2. Different profits and losses: Hedging simply means that the profits and losses are offset. Hedging transactions refer to two transactions related to the market at the same time, but in opposite directions and in the same quantity, and the final profits and losses are offset. Hedging is actually a form of 'liquidation'.


3. Different norms: Hedging and hedging have similarities, both are ways to avoid risks, but there are also significant differences between the two. From the perspective of the object, the hedging is for spot forward contracts, while the hedging object is for future spot prices. Secondly, in terms of the effectiveness of risk avoidance, hedging transactions are far inferior to hedging. Although hedging can also achieve risk avoidance, it cannot achieve the purpose of hedging.


In short, hedging refers to replacing larger spot price risks with smaller basis risks. Although this concept is easy to understand, it is not easy to truly do well. Investors need to practice and summarize more.


Is hedging the same as hedging?

Hedge and hedging are both English for Hedge,It means to avoid danger. Hedging is a type of hedging transaction that emphasizes hedging. Hedging transactions involve both hedging and profit-making. The purpose of hedging is mostly adopted by production enterprises, while the purpose of making profits is mostly adopted by hedge funds.


【 EBC Platform Risk Reminder and Disclaimer 】: There are risks in the market, and investment needs to be cautious. This article does not constitute investment advice.

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