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Giant hedging refers to the use of the futures market as a place to transfer price risk, and the use of futures contracts to avoid future uncertainty risks. Hedging is a way to avoid or transfer the risk of spot price fluctuations, the purpose is to lock in profits and control risks, so that enterprises can better avoid risks in the early stage of investment behavior, it is only to bear a small part of the risk of market price fluctuations, is within the scope of enterprises in the recent investment can bear.

On October 21, 2008, CITIC Pacific announced that in order to counter the currency risk faced by the West Iron Project, the company entered into certain leveraged foreign exchange trading contracts and incurred losses, and the actual loss was HK$807 million. As of 17 October, leveraged foreign exchange contracts still in force suffered a loss of HK$14.7 billion at fair value. The huge loss shocked the ** securities industry, and the share price of CITIC Pacific fell by 70% in just one week after the resumption of trading. In the end, Rong Zhijian, who single-handedly built CITIC Pacific, announced his resignation, and Fan Hongling, who has followed Rong Zhijian for more than 20 years, also announced his resignation as general manager of CITIC Pacific.

In general, when large enterprises make large overseas acquisitions, they must take into account the risk of exchange rate fluctuations between their local currency and foreign currencies due to the long payment time. In order to lock in costs, companies generally trade foreign exchange futures. But how can it cause such a big loss if it is clearly hoped to be hedged? Let's take a look at the back of this hedging contract.

CITIC Pacific has built an iron ore project in Australia and needs to purchase equipment and raw materials from Australia and Europe. You can't go shopping with Hong Kong dollars, people want Australian dollars and euros.

Therefore, CITIC Pacific needs to exchange its Hong Kong dollars or US dollars into Australian dollars and euros first, and then use it to buy what it wants. At the beginning of 2008, CITIC Pacific could exchange $0.85 for $1, but by June it needed $0.93, which means that the Australian dollar appreciated, so CITIC Pacific needed more dollars to exchange for Australian dollars. They thought that this would not work, the uncertainty was too great, and in order to avoid this risk, they used hedging. How does it work?

They signed a contract with several other investment banks to receive a total of $9 billion from them in monthly instalments of $0.87 to $1 until October 2010. In this way, even if the Australian dollar appreciates again, CITIC Pacific will not have to be afraid, they can buy the Australian dollar at a fixed price of $0.87 every month, and the cost will be locked in.

In 2008, the financial crisis affected the Australian dollar and the unprecedented depreciation of the Australian dollar, and by November 2008, it only took $0.65 to buy $1 Australian dollars, and CITIC Pacific had to buy Australian dollars from these people at a price of $0.87 a month. It is equivalent to a loss of $0.22 per $1 purchase, a total of nearly $9 billion to buy, and a loss of nearly $2 billion, so there is the above scene.

Many people may ask, isn't this hedging, anyway, the dollar cost to buy 9 billion Australian dollars is still as much as expected at the beginning, just look at the dollar and there is no loss? In fact, CITIC Pacific's investment in Australia will only cost about 2.6 billion Australian dollars in the next 20 years, but they have bought 9 billion Australian dollars, which is no longer hedging, but speculation.

Giant hedging refers to the use of the futures market as a place to transfer price risk, and the use of futures contracts to avoid future uncertainty risks. For example, a company wants to buy 100 tons of soybeans in the next three months, but is afraid that the price will rise, so it buys 1,000 tons of soybeans in the futures market and makes a deal three months later, so that the price is locked in, and the price of soybeans has nothing to do with it.

Hedging is a way to avoid or transfer the risks brought about by the rise and fall of spot prices, in order to lock in profits and control risks, so that enterprises can better avoid risks in the early stage of investment behavior, it is only to bear a small part of the risk of market price fluctuations, is within the scope of enterprises in the recent investment can bear. But speculation is different, it is not to avoid risks, but to reap profits in the process of market changes, and the risks it takes are very large, which may lead to the collapse of enterprises, CITIC Pacific is a good example.

Hedging is a tool that transfers price risk, using futures contracts to determine prices. However, it is only risk-averse, not risk-free. In investing, we should take advantage of the opportunities that risk brings to us, rather than seeking opportunities to invest in risks.

The same is true in the stock market, where profit and risk go hand in hand.

When Xiao Wang first entered the stock market, he only invested 3,000 yuan. But in just 10 days, 3 times the profit was gained. It stands to reason that Xiao Wang should be happy, but Xiao Wang regrets it very much, because he thinks that if he could have invested more, he would have earned more than this now.

So, when Xiao Wang invested for the second time, he invested all his family's 100,000 yuan in the stock market, and he thought that even 40% of the profit was higher than his annual salary.

Soon, Xiao Wang earned 10,000 yuan, which strengthened his idea. However, just when he was dreaming of making a fortune, the stock market suddenly took a sharp turn, and as a result, all the stocks he bought were trapped, and he could only hope to return to a good price as soon as possible and clear his position.

In the investment market, there are many investors who have experienced Xiao Zhang's experience. The stock market continues to be hot, and profits are ballooning, drowning out the caution that investors should be with the market, and they blindly invest so much money that they can't extricate themselves. Countless painful lessons have proved that risk control always comes first in the investment market. From a certain point of view, the return is actually a by-product of risk control, and only by controlling and staying away from the risk can you have the opportunity to make a profit. That is to say, if you do not have a sense of risk and the ability to control risk, even if you make a huge profit in a short period of time, sooner or later it will turn into a loss, and even the principal will cease to exist.