In recent years, affected by uncertain factors such as macroeconomy, weather and planting income ratio, the annual fluctuation range of the peanut market is large, and the seasonal characteristics of peanut consumption have weakened, which puts forward higher requirements for the grasp of the cyclical and trend of related industrial enterprises. Based on this, peanut ** and options are effectively combined and synergized with each other, providing a more three-dimensional risk management system for the entire industrial chain. More and more industrial enterprises have begun to choose to use options to assist in the implementation of risk management.
**. Combination of options to improve the overall hedging quality and efficiency
From the perspective of the use of financial instruments, options can help industrial enterprises grasp opportunities and hedge risks from dimensions other than ups and downs. Shi Hengyu, chief analyst of vegetable oil at the Zhongtai ** Research Institute, said.
Zhong Xiao, assistant general manager of the hedging trading department of COFCO Oil Holdings, said frankly that in recent years, the output of domestic peanuts has fluctuated a lot, and the import volume of peanuts has been increasing, resulting in large fluctuations in peanut spots, and enterprises need to use financial derivatives for hedging to ensure the development of conventional business.
COFCO Oil & Oil participated in the variety research, contract design, delivery warehouse application and transaction delivery of peanuts, and actively used peanuts for hedging for spot operations, and achieved good results. After the listing of peanut options, peanut options were positioned as a powerful supplementary tool for hedging, and a combination of hedging strategies suitable for different scenarios was flexibly formulated, which was continuously optimized and improved in practice, and the overall hedging quality was further improved. Zhong Xiao said.
In the interview, the reporter learned that for the leading enterprises in the industrial chain, adjusting the risk exposure of food peanuts, the occupation of hedging funds and the inability of the reverse market to effectively hedge are the three relatively prominent problems in the use of peanuts. Based on this, Chen Qili, deputy general manager of Henan Chishu Agricultural Development Co., Ltd., said that the company is actively using the selling strategy to assist production and operation. The specific purpose of the put strategy is twofold, one is to obtain better hedging than ***, and the other is to increase the return under the premise of controllable overall risk. Looking at 2023 alone, there will be cases of liquidation profits and expiration exercises, and on the whole, the above two items can basically be achieved.
According to Chen Qili, in November 2023, the new season of summer peanuts will be listed in a centralized manner, and the spot market will open high and go low, because the peanut market in the 2023 season will be characterized as a "double increase" pattern, and the spot market will continue to decline. "As a leading enterprise, we need to have a reasonable inventory to serve downstream customers, in order to ensure the normal operation of the business, and at the same time effectively carry out risk management, we carry out hedging operations on peanuts and options at the same time. Through comprehensive research and judgment, we believe that it is unlikely that the ** rise of PK2403 will exceed 9100 yuan ton, so on November 15, 2023, we will purchase 500 tons of spot at 8800 yuan ton, establish a corresponding short order at 8980 yuan ton on PK2403, and sell PK403C9100 at the same time, and collect a premium of 210 yuan. In mid-December 2023, the spot will be sold for 9,300 yuan, the position will be closed for 8,800 yuan, and the option will be closed for 140 yuan. Through the hedging operation of ** and options, the business made a total profit of 750 yuan, and at the same time of risk management, it achieved additional thickened profits. Chen Qili said.
The listing of peanut options has brought significant changes to the peanut spot enterprises. In the past, it was necessary to make accurate judgments to carry out spot operations or long hedging operations, but now you can trade on the left side, and when you determine the area near the bottom, you can sell put options to establish a virtual long position. In the past, it was necessary to accurately judge the top and carry out spot selling or short hedging operations, but now it is possible to sell call options and open covered positions when it is judged to be basically about to reach the top area. These changes allow us not to judge the top and bottom as accurately as before, but only to judge the top and bottom area according to the fundamental information of the spot. Chen Qili said.
Innovate business models to promote industrial transformation and upgrading
Zhong Xiao said that at present, the domestic oil and oil industry has basically achieved full coverage of options, and enterprises have a richer choice of tools when trading, and can formulate more scientific and meticulous trading strategies according to actual business needs, and can continuously improve the learning ability and professional ability of the trading team, and can continue to innovate and expand the business model to promote the transformation and upgrading of spot products.
In practice, options have four main advantages: first, the formulation of trading strategies is more detailed, and the expression of judgment is more accurate; The second is to increase the profitability dimension, such as earning time value and volatility change income; Third, the application scenarios of the combination strategy based on the four basic operations are very rich and flexible; Fourth, the risk of call operation is relatively controllable, and the cost of occupied capital is low. Zhong Xiao said.
Zhong Xiao introduced that from July to August 2022, the oil and oil crops will oscillate after falling from a high level, and the domestic peanut planting area will gradually become clear, and the market generally believes that the national peanut production will decrease by 20%-30% year-on-year, and the local production area will reduce by 50% year-on-year, and some production areas have suffered from the impact of unfavorable weather in the growth stage, and the quality of peanuts has been damaged. At this time, COFCO Oil's Feixian COFCO Factory had finalized the sales contract for the fourth quarter with the customer, and accordingly formulated a peanut procurement plan for the new season. The hedging team believes that it is necessary to use the market to do hedging for future purchases before the new season peanut scales are opened, and the listing and trading of peanut options greatly enriches the hedging toolbox, and you can sell put options near the parity to earn premiums to reduce the cost of opening positions.
Based on this, from August to September 2022, COFCO Oil sold the corresponding number of put options with an exercise price of around 9,500 yuan ton when PK2301** was at 9,500-10,000 yuan ton, and ** ranged from 150-200 yuan ton. "On the premise of anticipating the future spot ***, the cost of forward spot purchase was locked in in advance through *** contract, and additional premium income was earned by selling put options. Later**as expected**, PK2301 rose to more than 11,000 yuan at most, and spot currency peanuts also rose to more than 10,500 yuan. The effect of this hedging is remarkable, and good economic benefits have been obtained, ensuring the stable operation of the factory. Zhong Xiao said.
It can be said that in recent years, the peanut production industry has gone through several stages of cognitive improvement, active participation and functional recognition of first-class derivatives, and has now developed to the stage of innovative application. In addition to traditional hedging, industrial enterprises are also exploring the comprehensive application of various derivatives such as basis and options to achieve more refined risk management, and also provide new ideas for the innovation of spot models. Pan Yueling, senior analyst of Huarong Rongda ** peanuts, said.