The difference between hedging, speculative trading and arbitrage trading

The purpose of arbitrage trading and speculative trading is to obtain investment returns, but there are differences in the way of operation, which is mainly reflected in: (1) different trading methods: **speculative trading is to build a single ** contract for a period of time.

Open a long or short position, that is, long when expected ****, short when expected ****, at the same point in time is a one-way transaction. Arbitrage trading is to establish a long position between related contracts, or between ** and spot at the same time.

Long and short positions are traded in both directions at the same time. (2) Profit is different: Speculative trading is to use the fluctuation of a single contract to make profits, while arbitrage is to use related contracts or cash and cash.

The relative difference between the goods arbitrages the profits. (3) The degree of risk taken is different: speculative trading bears the risk of changes in a single contract, while arbitrage trading bears the risk of changes in spreads. More exciting content is available on Micro.com.

1. The purpose of the transaction is different

1) Hedging is a way to avoid or transfer the risks caused by the rise and fall of spot **, in order to lock in profits and control risks;

2) Speculators are there to make a profit from risk.

2. Different risk tolerances:

1) The hedger only bears the risk caused by the change in the basis, and the relative risk is small;

2) Speculators need to bear the risk brought by the change, and the relative risk is larger.

3. Different operation methods:

1) The hedger's position needs to be formulated according to the spot position, and the hedging position is operated in the opposite direction to the spot position, and the type and quantity are the same or similar;

2) Speculators trade according to their own capital volume, capital occupancy rate, psychological tolerance and judgment of the trend.

Hedging refers to the trading activities of using the market as a place to transfer risks, using the contract as a temporary substitute for buying and selling commodities in the spot market in the future, buying commodities now and preparing to sell them later, or insuring the commodities that need to be bought in the future.

Arbitrage refers to the fact that investors or borrowers use the difference between the interest rates of the two places and the difference in the exchange rate of currencies at the same time to liquidate capital to make profits. There are two types of arbitrage: offset arbitrage and non-offset arbitrage.

Also known as long hedging, spot ** and **** both rose, and the profits in the ** market largely offset the losses brought by spot ****. Feed companies have obtained better hedging results than the model, effectively preventing the risks caused by raw materials.

However, due to the rise of the spot market is greater than the rise of the spot, the basis expands, so that the feed enterprises in the spot market due to the rise of the spot loss is greater than the market due to the rise of the sale of the contract profits, the profit after the break-off is still a loss of 1,000 yuan. This is caused by an adverse movement in the basis and is normal.

Investors who sell assets (mostly **) in order to avoid risks**corresponding**. That is, investors choose to take short positions in the spot market and long positions in the ** market. The reason is that investors are worried that the asset will be in the market, so when the market is profitable, they will make up for the losses in the spot market.

The investor plans to invest a sum of money received in the future into the market, before the funds are in place, the investor believes that the stock will be in the short term, in order to reduce the need to buy the asset in the future and suffer losses, the investor can first contract in the market, so as to fix the future purchase.

"Hedging is to prevent ****, and selling hedging is to prevent ****.

For example, in the future, enterprises will hedge soybeans in order to prevent soybeans from rising, that is, hedging. Now the spot market is 100 yuan tons, such as half a year later the spot market may be ** to 120 yuan tons, then now in the ** market to do ** 50 tons of soybean ** contract, wait until half a year later in the spot market ** 50 tons of soybeans, at the same time in the ** market will be the previous 50 tons of soybean ** contract sold, so in half a year later at this point in time the ** market is to sell, the spot market is **, the direction of the transaction is the opposite.

Sell hedging.

For example: a company wants to ** soybean in the future, but is worried about soybean ****, at this time should sign a put option (sell soybean in the market**), half a year later, soybean **really**, at this time, soybean **** in the spot market, so there is a loss in selling spot, and in the **market, **** soybean contract (**market income), hedging and closing, **market is profitable, so as to achieve hedging.

Answer]: Hedging refers to a trading activity in which an enterprise designates one or more hedging instruments in order to avoid foreign exchange risk, interest rate risk, commodity risk, stock negotiation and verification risk, credit risk, etc., so that the fair value of the hedging instrument or cash flow change is expected to offset all or part of the fair value or cash flow change risk of the first period item. Speculative arbitrage refers to a trading activity in which traders bear their own risks, and derivative finance includes the direction of mining tools, and earns the difference in changes over time.

Hedging traders are generally production and business operation units, and they should use derivative financial instruments to hedge the volatility-sensitive risks of basic financial instruments and spot (i.e., ** hedging items); Speculative arbitrageurs are mostly speculators who dare to take risks in the capital market, they generally do not involve basic financial instruments or spot trading, only buy and sell derivative financial instruments, and make profits by buying at a low price, selling or selling, and buying at a low price. Therefore, from a certain point of view, the two are indispensable: traders have hedging requirements, that is, risk aversion, and speculative arbitrageurs who dare to take risks; If the hedger misjudges, the opportunity to earn from the derivative financial instrument will be obtained by the speculative arbitrageur.

It can also be said that the coexistence of the two is the basis for the existence and development of the derivative financial instrument market.