What is a Hedge?

A hedge is an investment used to reduce the impact of price movements from selling an asset. It is the foundation of futures and options, in principle, hedging provides a chance in overcoming uncertainty.  

As an example of hedging, producers such as farmers often sell futures on the crops they raise to hedge against a drop in commodity prices. This makes it easier to do long-term planning.

Simply put, a hedge is a risk management strategy for the producers of the commodity market. To learn more about the benefits of hedging refer to this article on “5 Things About Hedging With Future Contracts To Know”.

Futures And Options  

The term hedging is often used with commodity futures and options, both of which are tied to an underlying asset.  As described above, hedging can take the form of risk management for producers, but it can also be used from the perspective of the trader.

For traders to hedge options, they initiate a call or a put.

  • Each call option gives the buyer the right to purchase a contract with the matching expiration date and strike price/the futures price of the commodity. This can be done when a buyer foresees that the price of the commodity will increase by the stipulated time.
  • Each put gives the buyer the right to sell an underlying asset with the matching expiration date and the strike price. This can be done when a buyer is shorting the underlying asset and selling at high prices.

The use of the call and put illustrates the underlying principle of the options market. Traders use these concepts to open a position (or multiple positions), to offset/hedge certain risks.  

Apart from options, the trading industry is currently open to many other derivatives (contracts between two parties on an underlying asset) and types of markets such as agriculture, energy, and metals.

Each of these derivatives and markets can be traded in a plethora of methods with the help of an international broker.

 

International Trading With Orient Futures Singapore  

Orient Futures Singapore provides an opportunity for both institutional traders and retail traders to have access to the international market.

Some examples of hedging in other markets include crude oil futures from the Dubai Mercantile Exchange (DME), NYMEX, and Tokyo Commodity Exchange Inc (TOCOM).

Moreover, to further expand operations and opportunities for trade, Orient Futures Singapore provides access to the Chinese derivatives market, which will allow global traders to engage in options contracts or trading from other regions. This includes regions such as America, the United Kingdom, and Southeast Asia.

View the full list of available exchanges and trades here.
 

Start Trading With Orient Futures Singapore 

Being an Overseas Intermediary of Shanghai International Energy Exchange (INE), Dalian Commodity Exchange (DCE), and Zhengzhou Commodity Exchange (ZCE), when foreign clients participate in internationalised futures contracts in these Chinese markets with us, they have direct access to trading, clearing, and settlement. Our parent company, Shanghai Orient Futures, is the largest broker in terms of aggregated volume across the five regulated exchanges in China.

Orient Futures Singapore also currently holds memberships at the Singapore Exchange (SGX), Asia Pacific Exchange (APEX), and ICE Futures Singapore (ICE SG).

We provide premium customer service at an affordable cost to all our clients. Our team will be there for you 24 hours on trading days to provide a one-stop portal for all your trades, with simple processes and an intuitive user interface that has low or near-to-zero latency.