Hengli Futures Sun Chaowang: Futures and options help polyester enterprise risk management

As the futures varieties of the polyester industry chain become increasingly rich, corporate risk management becomes more flexible and diverse. The emergence of PTA options has provided more possibilities for industry risk management, and also provided enterprises with more price discovery signals and risk hedging tools. On September 2, Sun Chaowang, deputy general manager of Hengli Futures, said at the PTA and Short Fiber Sub-forum of the 2021 China (Zhengzhou) International Futures Forum that futures and options tools each have their own tricks in the way industrial enterprises use derivatives for risk management. In different scenarios, the “double sword combination” of the two tools protects polyester companies.

It is understood that in the past 18 years, the maximum annual spot price fluctuation in the PTA market has basically exceeded 40%, and in high years it can reach 120%. Such severe fluctuations have brought huge consequences to industrial enterprises, especially trading and consumer enterprises. risk. In the face of such violent market fluctuations, it is impossible to cope with the industrial chain itself by relying on physical enterprises. In order to solve this problem, futures, options and other tools came into being.

A reporter from Futures Daily learned that PTA futures is highly recognized in the industry chain, and the company is also very skilled in combining futures and cash. At present, in addition to traditional hedging to lock in raw material costs and sales profits, many companies also transfer inventory through basis trade or rights-based trade to reduce inventory costs and price risks and improve their market competitiveness.

For risk management, polyester companies can choose different risk management models in different scenarios. Among them, the purpose of risk management with futures instruments is to effectively split, combine, transfer, and reset risks based on the actual situation of the enterprise—that is, to retain risks that are beneficial to oneself as much as possible, and to shield risks that are detrimental to the achievement of one’s goals. risk. In Sun Chaowang’s view, based on the principles of “same time, opposite direction, similar quantity, and similar variety”, futures instruments can shield most of the effects of price risks.

The method of risk management in futures is relatively simple, mainly including buying hedging and selling hedging. However, the strategic model of using option tools for risk management is relatively diverse and complex.

“Compared with traditional futures instruments, options have the advantage of refinement.” Sun Chaowang said that on the one hand, options can achieve risk management in different price ranges. Options, on the other hand, can retain the benefits of price changes in a favorable direction while avoiding adverse risks. For example, after an option position is converted into a futures position, you can continue to hold the futures position and then close it when the opportunity arises.

He gave an example: When the PTA2109 futures price was only 4,500 yuan/ton in early June, a certain PTA trader A believed that the price of PTA would inevitably rise sharply in the next few months. However, he suffered from insufficient funds and was unable to directly stock up on spot goods. Lack of trading skills, worried about “doing it right” when trading futures, but unwilling to give up the opportunity of this wave of inventory appreciation. Then Trader A can choose to buy an out-of-the-money call option that expires in 3 months, has an exercise price of 5,500 yuan/ton, and a premium of 10 yuan/ton.

“In the next 3 months, as long as the PTA futures price starts to rise, or even does not rise, it is very likely to make money (volatility). During the holding period, if the option price rises or the option becomes real-valued, you can level at any time. Position operation; if the holding expires, the underlying futures contract will be profitable if it rises above 5510 yuan/ton, and the option can be converted into a futures position, thereby closing the position. The worst case scenario is just holding the expiry, and the option If it is voided due to virtual value, a premium of 10 yuan/ton will be lost,” Sun Chaowang explained.

As an effective supplement to futures instruments, options can not only achieve risk management by price range, but also provide more refined and differentiated risk management for different types of enterprises. For example, the buyer can retain the proceeds from the increase in futures prices after the option is closed or the option is converted into a futures position. “Through option combinations, we can realize price position building and realization functions that spot and futures do not have. In addition, through directional transactions and volatility transactions, options can provide more comprehensive protection for enterprises.” Sun Chaowang said.

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