As a textile country, China's cotton production and consumption rank among the top in the world, with a large market and many industrial chain enterprises. In 2004, cotton futures were listed and traded in Zhengshang. For more than a decade, the cotton futures market has been running smoothly and its functions have been fully utilized. Market participants believe that a good spot stock has created conditions for the launch of cotton options, and the listing of cotton options will also promote the better development of the spot market.
National cotton market monitoring system data show that in 2017/2018, China's cotton production was 6.13 million tons, net imports were 1.14 million tons, and consumption was 8.17 million tons. China's cotton industry chain covers many aspects such as planting, ginning, textiles and clothing. Cotton prices have many factors, including production, import and export volume, reserves, international cotton prices, exchange rates, downstream textile demand, chemical fiber substitution and domestic policies. Cotton prices fluctuate frequently, and relevant entities in the industrial chain have strong risk management needs.
In the futures market, industry insiders said that since the cotton futures market, the market participation has been continuously improved, and the functions have been continuously deepened. It has become one of the major futures varieties in the world, and its current price correlation coefficient is as high as 0.98. Especially since the start of the cotton target price reform in 2014, the cotton futures market has been steadily increasing and the market function has been further developed. In 2017, the benchmark delivery of cotton futures was adjusted from the mainland to Xinjiang, and the price of cotton futures was further enhanced.
From the perspective of market participation, the reporter learned from Zhengshang that the proportion of corporate customers in cotton futures is about 51%, which is the first among the agricultural products futures of Zhengshang, indicating that the cotton industry chain is safe. The demand is stronger. The physical delivery of cotton futures was carried out smoothly, with an average annual delivery of about 100,000 tons. The successful experience and advanced practices of cotton enterprises in the current operation period are constantly emerging, and the cotton price trading model is gradually promoted.
"It can be said that a good market base has created conditions for the launch of cotton options, and also helps the cotton options to play a market function after listing, to better meet the diversified and personalized hedging needs of industrial enterprises. Improve the quality of the operation of the spot market in the whole period.” The relevant person in charge of Zhengshang Institute told the Futures Daily that the main factors of China's cotton industry chain, especially the middle and lower reaches traders and ginning mills, are large, risk tolerance and hedging. The goals are different. In the use of options to protectIn value, companies can choose option contracts with different exercise prices and different expiration months, flexibly control the cost of hedging, or choose a combination of strategies that include buy and sell options, and reduce the cost of hedging by selling options.
In addition, when using options for hedging, you only need to pay the premium to buy a call or put option to lock the cost of the hedge, do not pay the deposit, there is no risk of additional margin, and you do not need to adjust the funds frequently. Position. For cotton-growing farmers, cooperatives and small and medium-sized cotton companies that do not have the talent and capital advantages, the option hedging is more convenient and simple in terms of operational procedures and cost control.