| FINANCIAL DERIVATIVE INSTRUMENTS | The Partnership
engages in the speculative trading of futures contracts, and forward currency contracts for the purpose of achieving capital appreciation.
None of the Partnership’s derivative instruments are designated as hedging instruments, as defined in the Derivatives
and Hedging The following
presents the fair value of derivatives contracts at September 30, 2017 and December 31, 2016. The fair value of derivatives contracts
is presented as an asset if in a gain position and a liability if in a loss position. Fair value is presented on a gross basis
in the table below even though the futures and forward contracts qualify for net presentation in the Statement of Financial Condition. September
30, 2017
Type of
Derivatives Contracts Asset Derivatives Fair Value Liability Derivatives Fair Value Net Fair Value
Futures Contracts
Agriculture $ 579,647 $ (278,099 ) $ 301,548
Currencies 959,082 (839,043 ) 120,039
Energy 258,507 (159,189 ) 99,318
Interest Rates 31,096 (1,147,211 ) (1,116,115 )
Metals 83,635 (497,399 ) (413,764 )
Stock Indices 2,746,990 (1,471,312 ) 1,275,678
Treasury Rates 86,508 (661,813 ) (575,305 )
4,745,465 (5,054,066 ) (308,601 )
Forward Currency Contracts 335,573 (1,095,937 ) (760,364 )
Total
Gross Fair Value of Derivatives Contracts $ 5,081,038 $ (6,150,003 ) $ (1,068,965 ) December
31, 2016
Type of
Derivatives Contracts Asset Derivatives Fair Value Liability Derivatives Fair Value Net Fair Value
Futures Contracts
Agriculture $ 1,111,896 $ (431,415 ) $ 680,481
Currencies 1,248,554 (5,361 ) 1,243,193
Energy 172,229 (129,016 ) 43,213
Interest Rates 708,726 (98,182 ) 610,544
Metals 787,551 (1,233,199 ) (445,648 )
Stock Indices 1,884,443 (883,651 ) 1,000,792
Treasury Rates 18,539 (77,820 ) (59,281 )
5,931,938 (2,858,644 ) 3,073,294
Forward Currency Contracts 1,408,337 (1,059,246 ) 349,091
Total Gross Fair Value
of Derivatives Contracts $ 7,340,275 $ (3,917,890 ) $ 3,422,385 The following
presents the trading results of the Partnership’s derivative trading and information related to the volume of the Partnership’s
derivative activity for the three and nine months ended September 30, 2017 and 2016. The below captions
of “Realized” and “Change in Unrealized” correspond to the captions in the Statements of Income (Loss)
for gain (loss) on trading of derivatives contracts. Three
Months ended September 30, 2017
Type of Derivatives Contracts Realized Change in Unrealized Number of Contracts Closed
Futures Contracts
Agricultural $ (685,294 ) $ 317,746
Currencies (411,535 ) 94,496
Energy (1,360,015 ) 695,257
Interest Rates (514,345 ) (42,459 )
Metals (990,808 ) (110,752 )
Stock Indices 2,049,460 2,283,004
Treasury Rates 40,656 (269,727 )
(1,871,881 ) 2,967,565 13,834 (1)
Forward Currency Contracts 1,037,662 (691,853 ) (2)
Total
gain (loss) from derivatives contracts $ (834,219 ) $ 2,275,712 Nine
Months ended September 30, 2017
Type of Derivatives Contracts Realized Change in Unrealized Number of Contracts Closed
Futures Contracts
Agricultural $ 835,940 $ (378,933 )
Currencies (7,427,155 ) (1,123,154 )
Energy (4,547,600 ) 56,105
Interest Rates (2,063,633 ) (1,726,659 )
Metals (3,769,281 ) 31,884
Stock Indices 18,225,869 274,886
Treasury Rates (1,174,617 ) (516,024 )
79,523 (3,381,895 ) 49,571 (1)
Forward Currency Contracts 4,052,037 (1,109,455 ) (2)
Total
gain (loss) from derivatives contracts $ 4,131,560 $ (4,491,350 ) (1)
(2)
Three
Months ended September 30, 2016
Type
of Derivatives Contracts Realized Change in Unrealized Number of Contracts Closed
Futures Contracts
Agricultural $ (489,154 ) $ (618,642 )
Currencies 2,145,472 (2,613,308 )
Energy (787,478 ) (1,325,991 )
Interest Rates 3,840,895 (4,554,392 )
Metals 364,972 (1,607,040 )
Stock Indices 1,335,935 981,174
Treasury Rates 2,471,453 (3,642,944 )
8,882,095 (13,381,143 ) 17,686 (1)
Forward Currency Contracts 2,304,265 (1,271,528 ) (2)
Total gain (loss) from derivatives contracts $ 11,186,360 $ (14,652,671 ) Nine
Months ended September 30, 2016
Type
of Derivatives Contracts Realized Change in Unrealized Number of Contracts Closed
Futures Contracts
Agricultural $ (1,531,377 ) $ (71,603 )
Currencies (26,541 ) (495,690 )
Energy (790,163 ) (1,996,951 )
Interest Rates 15,508,286 2,724,427
Metals (4,688,033 ) (2,256,636 )
Stock Indices (4,615,241 ) 1,182,757
Treasury Rates 4,763,296 (249,202 )
8,620,227 (1,162,898 ) 58,550 (1)
Forward Currency Contracts 2,592,098 1,053,882 (2)
Total gain (loss) from derivatives contracts $ 11,212,325 $ (109,016 ) (1) These closed
contract amounts are representative of the Partnership's volume of derivative activity for futures contracts during the period. (2) The numbers
of long contracts closed using average cost for the three and nine months ended September 30, 2016 were 424,299, and 472,102,
respectively. The numbers of short contracts closed using average cost for average cost for the three and nine months ended September
30, 2016 were (307,914), and (370,704), respectively. These long and short numbers are representative of the Partnership's volume
of derivative activity for forward currency contracts during those periods With respect
to futures contracts and options on futures contracts, the Partnership has entered into an agreement with the Clearing Broker
which grants the Clearing Broker the right to offset recognized derivative assets and derivative liabilities if certain conditions
exist, which would require the Clearing Broker to liquidate the Partnership’s positions. These events include the following:
(i) the Clearing Broker is directed or required by a regulatory or self-regulatory organization, (ii) the Clearing Broker determines,
at its discretion, that the risk in the Partnership’s account must be reduced for protection of the Clearing Broker, (iii)
upon the Partnership’s breach or failure to perform on its contractual agreements with the Clearing Broker, (iv) upon the
commencement of bankruptcy, insolvency or similar proceeding for the protection of creditors against the Partnership, or (v) upon
the dissolution, winding-up, liquidation or merger of the Partnership. With respect
to foreign currency forward contracts, the Partnership has entered into an agreement with the Clearing Broker, whereby the party
having the greater obligation (either the Partnership or the Clearing Broker) shall deliver to the other party at the settlement
date the net amount of recognized derivative assets and liabilities. The following
table summarizes the disclosure requirements for offsetting assets and liabilities:
Offsetting the Financial Assets and Derivative Assets
As of September 30, 2017 Gross
Amounts Not Offset in the Statement of Financial Condition
Description Gross
Amounts of Recognized Assets Gross Amounts Offset in the Statement of Financial Condition Net
Amounts of Assets Presented in the Statement of Financial Condition Financial Instruments Cash Collateral Received (1) Net Amount
Forward contracts $ 335,573 $ (335,573 ) $ – $ – $ – $ –
Futures contracts 4,745,464 (4,745,464 ) – – – –
Total $ 5,081,037 $ (5,081,037 ) $ – $ – $ – $ –
Offsetting the Financial Liabilities and Derivative
Liabilities
As of September 30, 2017 Gross
Amounts Not Offset in the Statement of Financial Condition
Description Gross
Amounts of Recognized Liabilities Gross Amounts Offset in the Statement of Financial Condition Net
Amounts of Liabilities Presented in the Statement of Financial Condition Financial Instruments Cash Collateral Pledged (1) Net Amount
Forward contracts $ (1,095,937 ) $ 335,573 $ (760,364 ) $ – $ 760,364 $ –
Futures contracts (5,054,065 ) 4,745,464 (308,601 ) – 308,601 –
Total $ (6,150,002 ) $ 5,081,037 $ (1,068,965 ) $ – $ 1,068,965 $ –
Offsetting the Financial Assets and Derivative Assets
As of December 31, 2016 Gross
Amounts Not Offset in the Statement of Financial Condition
Description Gross
Amounts of Recognized Assets Gross Amounts Offset in the Statement of Financial Condition Net
Amounts of Assets Presented in the Statement of Financial Condition Financial Instruments Cash Collateral Received (1) Net Amount
Forward contracts $ 1,408,337 $ (1,059,246 ) $ 349,091 $ – $ – $ 349,091
Futures contracts 5,931,938 (2,858,644 ) 3,073,294 – – 3,073,294
Total $ 7,340,275 $ (3,917,890 ) $ 3,422,385 $ – $ – $ 3,422,385
Offsetting the Financial Liabilities and and Derivative
Liabilities
As of December 31, 2016 Gross
Amounts Not Offset in the Statement of Financial Condition
Description Gross
Amounts of Recognized Liabilities Gross Amounts Offset in the Statement of Financial Condition Net
Amounts of Liabilities Presented in the Statement of Financial Condition Financial Instruments Cash Collateral Pledged (1) Net Amount
Forward contracts $ (1,059,246 ) $ 1,059,246 $ – $ – $ – $ –
Futures contracts (2,858,644 ) 2,858,644 – – – –
Total $ (3,917,890 ) $ 3,917,890 $ – $ – $ – $ – (1) The Partnership
posted additional collateral of $16,678,319 for 2017 and $27,289,467 for 2016, with the Clearing Broker. The Partnership may post
collateral due to a variety of factors that may include, without limitation, initial margin or other requirements that are based
on notional amounts which may exceed the fair value of the derivative contract. |
