Case Study On The Hedging By Wuhan Cable Group Limited Company Using Aluminum Futures

Facing to deepen the market economic system reform and historic juncture of joining the WTO, in the guidelines and policies of steady development futures market, the futures market finally get rid of the doldrums for several years, and ushered in the market's staggered to the development of major transit. As our economic development of the futures market, china in international capital market influence among the more important, the futures market potential would be enormous. Futures market can find the price, avoid the risk, communicate the production and marketing, lock the costs and profits, to save the transaction fees, to create the market competition order. So many functions there are little doubt in:only established risk management mechanisms by center of futures and derivative instruments, futures market can effectively solute enterprise economic risks.Futures are called financial derivatives or financial derivatives. It is traditional financial instruments based on unscathed, and the ordinary commodity prices and financial instruments are closely related to new investment tool. Chinese futures market develops in the past three stages, including new period and standards and norms in the development of the period. Futures markets there are two major functions, the first is the price found, the second is hedge, hedger transfer price risk transfer to go out and reached for the costs and operating profit for the purpose of the city. Wuhan cable group limited company is the group of stars, for many years in cable, the relevant product. To the aluminum processing enterprises, if its price, which would weaken its profitability. For aluminum processing enterprises, who holds the purchase costs aluminum ingot, he holds the initiative in the competition. In such a master of the market risk of the product at a price of our competitiveness and futures markets through hedging deal in order to avoid future product price risks for enterprise. For Wuhan cable group in the bid, orders and sales three links, this paper design three different hedging cases:the first case is that enterprise tender firstly and then hedge risk, hedging under this program on the procurement side, the risk is the core of bid price and market price to avoid big losses caused by the change. The second case is that enterprise immediately hedge of purchasing the corresponding amount of aluminum ingot in the futures market after the sales contract is signed, and then buy stock in batches according to the production process, and then level off in batches corresponding futures position. Scheme in three is that enterprise sold on the forward market hedging transactions, as long as the narrowing of basis, hedging can be fully protected persons, and in reverse on the market, as long as the base widened, both spot price and futures price is up or down, selling the hedgers can get full protection, as well as the profit.