Market Condition Analysis On Basis Traded Of Iron Ore

The purpose of the futures market is to stabilize commodity prices. Many firms hedge the risk of price fluctuations from commodity hedging transactions. However, because of the rapid development of economic globalization, as well as excessive speculative behavior, commodity price volatility increases. The financial of commodity is more obvious, and it is more difficult for hedging to achieve the desired objectives.As a new method of trading,basis trading, is providing firms more initiative, in favor of the traditional risk-averse trade futures to hedge the absolute price fluctuations. Our country is a big consumer in imported iron ore. But the lack of iron ore pricing, resulting in a passive state of our country in the transaction. Currently there is no authority futures pricing standard in the international iron ore market. The development of iron ore based spread betting is in favor of our rights in pricing iron ore industry.The article analyzes the market conditions. First, introduce in detail the basis of Basis Trading: Hedging and Price Discovery functions of future market, and then elaborate Basis Trading Theory itself in detail, summarize the literature review of Basis Trading, and summarize the current situation of domestic and foreign-based in basis trading. The article selects Rizhao Steel Group signed with Yongan Capital Company the first contract on basis trading as the analysis body, first analyzes the win- win source of interest in their trading, and then analyze the market condition in which is difficult in promoting basis trading spread all over the country shortly.All these analysis involved in iron ore basis trading in advance are to improve the iron ore pricing power of our country in the international transactions, and I hope the use of a wide range of knowledge and innovation-based in basis trading, is contribute to the stable development of the futures market.