Jieming Zheng, general manager of agricultural product department in Nanhua Capital, delivers his report of Futures derivative tools help cotton textile industry develop steadily.

Mr. Zheng introduces his report into three parts.

The first part is about difficult points for cotton textile industry to apply futures and their derivatives. Firstly, he analyzes futures and options should be more used as speculative instrument, and business operation more depends on the judgement on sales. Then he introduces four aspects in terms of mismatch between spot market and futures market, including the conflict between continuous spot and periodical futures, spot differentiation and futures standardization, wide range of industry and regional delivery, personalized demand for production and standardization of financial market.

The second part is about how to use financial tools to serve for cotton textile industry. Mr. Zheng points out the focus points of enterprises include four aspects, and they are inventory condition, industry cost, profit and order condition, and industry prosperity degree respectively. He also points out that main determination factor of mills inventory and financial tools’ choosing is market structure. The choice of inventory, financial tools and management expectation will be totally different amid Contango and Back structure, and future market can give predicted structure to the current market. In addition, the choice mind for financial tools amid different structures is also reported.

The third part is the introduction of option strategy. Mr. Zheng points out applying tools is the key. The applying starting point should be industry or enterprise. The proportion of risk and profit of sales judgement is supposed to be controlled properly according to different enterprises. At last, he analyzes the traits and application condition of different options.