What Is Long Short Equity?

Long is a Chinese word, pronounced du tóu, which means that investors are optimistic about the stock market, and the stock price is expected to be bullish, so they buy the stock at a low price, and then sell it when the stock rises to a certain price to obtain the difference.

[du tóu]

Long is a Chinese word, pronounced du tóu, which means that investors are right

Bulls are one of the forms of speculation in futures exchanges.

Long position

1. Small caps start first

People usually put

Long hedging refers to a person who is in a short position in the spot foreign exchange market, that is, a person who has foreign currency liabilities, in order to prevent the exchange rate from rising when repaying foreign currencies in the future, and make a corresponding purchase transaction in the foreign exchange futures market.

The following illustrates the principle of long hedging.

The US importer expects to pay 25 million yen in imports 3 months later, and the spot exchange rate is 1 US dollar = 146.70 yen. Into the Japanese Yen, I bought 2 Japanese yen futures contracts that expired in September in the foreign exchange futures market, and performed long hedging.

Spot market	Futures market
June 10, 20XX The spot exchange rate for the day is $ 1 = 146.7 yen 25 million yen worth 170,416 US dollars, expected yen appreciation September 10, 20XX The spot exchange rate on the day was 1 USD = 142.35 yen. If you buy 25 million yen from the spot market, you need to pay $ 17523.	June 10, 20XX Buy 2 Japanese yen futures contracts that expire in September, each amount is 12.5 million yen, the transaction price is 0.006835 US dollars / yen, using the foreign exchange futures market quotation method is 6835 points, using the bank foreign exchange quotation rule is 146.30 Yen / dollar September 10, 20XX Sell 2 Japanese yen futures contracts due in September with a transaction price of 7030 points (using inter-bank foreign exchange quotation method is 142.25 yen / USD)
Increased costs 175623-170416 = $ 5207	Profit (70306835) × 12.5 × 2 = $ 4875

The table shows that when the importer actually paid the Japanese Yen after three months, he had to pay an additional cost of 5,207 US dollars due to the increase in the yen exchange rate. The increase in costs can be largely offset by the profits of the futures market. Of course, if the yen exchange rate falls on September 10, the benefits of cost reduction in the spot market will be roughly offset by losses in the futures market.

Speculative trading of foreign exchange futures is to obtain profits from changes in the price of foreign exchange futures and to bear the risk at the same time by buying and selling foreign exchange futures contracts.

Guotai Junan Futures

Risky trading behavior. Speculative trading of foreign exchange futures can be divided into long speculation and short speculation from the direction of speculators' positions. Forex futures arbitrage trading refers to the transaction that a trader buys and sells two related foreign exchange futures contracts at the same time, and then hedges the contracts in his hand at the same time to profit from the relative price changes of the two contracts. The form of arbitrage of foreign exchange futures is roughly the same as that of commodity futures, and can be divided into cross-market arbitrage, cross-currency arbitrage and cross-month arbitrage.

In summary, the existence of the foreign exchange futures market provides a place for many economic entities to avoid exchange rate risks. Although it is impossible to completely eliminate all risks of conducting various trade and financial transactions, foreign exchange futures transactions have at least reduced most of the risks and increased the economic stability of economic entities. At the same time, foreign exchange futures trading has good market liquidity due to the standardization of contract terms, simple and convenient transaction procedures, low costs, and only need to pay a small margin to achieve the purpose of risk avoidance, saving capital costs.