Project Background - In the second half of 2024, the rebar steel prices are continuously declining due to the slowdown in domestic infrastructure demand and the downturn in the overseas economy [2] - Company A faces two main challenges: difficulty in stopping losses from cumulative purchase options and risks associated with post-settlement procurement and sales [2][5] - The operational model of Company A involves locking in procurement costs on a bi-weekly basis while dynamically pricing sales based on real-time market conditions, which exposes the company to inventory accumulation risks during price downturns [2] Solution Design - Huatai Great Wall Capital has customized a combination solution for Company A, including "Vanilla Buy Option Daily Settlement Cumulative Structure (Hui Xin Bao 1.0)" to hedge cumulative purchase exposure and "Shark Fin Knockout Barrier Daily Settlement Cumulative Structure (Hui Xin Bao 2.0)" to subsidize spot sales [3] - Hui Xin Bao 1.0 is designed to hedge cumulative purchase exposure, alleviating margin call pressures by compensating for daily losses when the closing price falls below the execution price [4][9] - Hui Xin Bao 2.0 aims to optimize monthly average settlement and capture volatility profits, allowing the company to manage procurement costs effectively while maintaining flexibility in sales pricing [13][19] Implementation Effects - During the observation period from July 3 to September 11, 2024, the RB24×× contract price dropped by 551 yuan/ton to 3068 yuan/ton, with Hui Xin Bao 1.0 compensating an average of 189 yuan/ton, effectively mitigating cumulative losses [12][22] - Hui Xin Bao 2.0 provided a net gain of 16 yuan/ton during its observation period, outperforming traditional hedging methods by capturing daily price fluctuations and reducing the cost of options [21][23] Project Summary - Hui Xin Bao 1.0 effectively decomposes cumulative exposure into daily risk points, dynamically hedging against floating losses and alleviating margin call pressures [22] - Hui Xin Bao 2.0 enhances profit capture through daily settlement and knockout refund mechanisms, significantly improving returns compared to traditional Asian options [23][24] - The flexible structure of the Hui Xin Bao series allows companies to adapt strategies based on market conditions, optimizing capital efficiency and reducing costs [24]