| FINANCIAL DERIVATIVE INSTRUMENTS | NOTE 7 - 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 June 30, 2018 and December 31, 2017. 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 Statements of Financial Condition. June 30, 2018
Asset Liability
Type of Derivatives Derivatives Net
Derivatives Contracts Fair Value Fair Value Fair Value
Futures Contracts
Agriculture $ 557,035 $ (247,147 ) $ 309,888
Currencies 495,568 (10,725 ) 484,843
Energy 1,088,570 (53,639 ) 1,034,931
Interest Rates 721,488 (14,374 ) 707,114
Metals 1,379,464 (879,508 ) 499,956
Stock Indices 14,643 (151,759 ) (137,116 )
Treasury Rates 77,312 (78,915 ) (1,603 )
$ 4,334,080 $ (1,436,067 ) $ 2,898,013
Forward Currency Contracts $ 329,187 $ (551,553 ) $ (222,366 )
Total Gross Fair Value of Derivatives Contracts $ 4,663,267 $ (1,987,620 ) $ 2,675,647 December 31, 2017
Asset Liability
Type of Derivatives Derivatives Net
Derivatives Contracts Fair Value Fair Value Fair Value
Futures Contracts
Agriculture $ 596,880 $ (204,713 ) $ 392,167
Currencies 213,479 (598,370 ) (384,891 )
Energy 1,359,853 (543,212 ) 816,641
Interest Rates 208,188 (445,496 ) (237,308 )
Metals 3,200,085 (1,208,675 ) 1,991,410
Stock Indices 1,262,437 (733,192 ) 529,245
Treasury Rates 201,234 (95,992 ) 105,242
$ 7,042,156 $ (3,829,650 ) $ 3,212,506
Forward Currency Contracts $ 2,248,858 $ (975,706 ) $ 1,273,152
Total Gross Fair Value of Derivatives Contracts $ 9,291,014 $ (4,805,356 ) $ 4,485,658 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 six months ended June 30, 2018 and 2017. 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 June 30, 2018
Type of Derivatives Contracts Realized
Change in Unrealized
Number of Contracts Closed
Futures Contracts
Agricultural $ 843,741 $ (194,475 )
Currencies (422,934 ) 349,543
Energy 3,762,571 (323,401 )
Interest Rates (162,129 ) 118,687
Metals 522,086 555,905
Stock Indices 199,592 266,985
Treasury Rates 10,516 164,538
$ 4,753,443 $ 937,782 9,158 (1)
Forward Currency Contracts $ (1,090,918 ) $ (212,174 ) (2)
Total gain (loss) from derivatives contracts $ 3,662,525 $ 725,608
Six Months ended June 30, 2018
Type of Derivatives Contracts Realized
Change in Unrealized
Number of Contracts Closed
Futures Contracts
Agricultural $ 212,968 $ (82,279 )
Currencies (3,483,437 ) 869,734
Energy 2,822,578 218,290
Interest Rates (483,490 ) 944,422
Metals 1,451,215 (1,491,454 )
Stock Indices 542,051 (666,361 )
Treasury Rates 23,930 (106,845 )
$ 1,085,815 $ (314,493 ) 22,911 (1)
Forward Currency Contracts $ 1,244,467 $ (1,495,518 ) (2)
Total gain (loss) from derivatives contracts $ 2,330,282 $ (1,810,011 )
(1) These closed contract amounts are representative of the Partnership's volume of derivative activity for futures contracts during the year.
(2) The numbers of long contracts closed using
average cost for the three and six months ended June 30, 2018 were 298,596, and 308,492, respectively. The numbers of short
contracts closed using average cost for average cost for the three and six months ended June 30, 2018 were (262,510), and
(289,552), respectively. These long and short numbers are representative of the Partnership's volume of derivative activity
for forward currency contracts during those periods. Three Months ended June 30, 2017
Type of Derivatives Contracts Realized Change in Unrealized Number of Contracts Closed
Futures Contracts
Agricultural $ 1,688,262 $ (528,868 )
Currencies (5,466,161 ) 1,045,138
Energy (1,680,617 ) (428,156 )
Interest Rates (1,612,134 ) (553,967 )
Metals (904,696 ) (256,501 )
Stock Indices 5,744,212 (1,493,387 )
Treasury Rates (852,586 ) (120,267 )
$ (3,083,720 ) $ (2,336,008 ) 18,147 (1)
Forward Currency Contracts $ 1,120,031 $ (925,477 ) (2)
Total gain (loss) from derivatives contracts $ (1,963,689 ) $ (3,261,485 )
Six Months ended June 30, 2017
Type of Derivatives Contracts Realized Change in Unrealized Number of Contracts Closed
Futures Contracts
Agricultural $ 1,521,234 $ (696,679 )
Currencies (7,015,620 ) (1,217,650 )
Energy (3,187,585 ) (639,152 )
Interest Rates (1,549,288 ) (1,684,200 )
Metals (2,778,473 ) 142,636
Stock Indices 16,176,409 (2,008,118 )
Treasury Rates (1,215,273 ) (246,297 )
$ 1,951,404 $ (6,349,460 ) 35,737 (1)
Forward Currency Contracts $ 3,014,375 $ (417,602 ) (2)
Total gain (loss) from derivatives contracts $ 4,965,779 $ (6,767,062 ) (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 six months ended June 30, 2017 were 427,605, and 474,708, respectively. The numbers of short contracts
closed using average cost for average cost for the three and six months ended June 30, 2017 were (350,515), and (369,167), 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 June 30, 2018
Gross Amounts Not Offset in the Statements of Financial Condition
Description Gross Amounts of Recognized Assets Gross Amounts Offset in the Statements of Financial Condition Net Amounts of Assets Presented in the Statements of Financial Condition Financial Instruments Cash Collateral Received (1) Net Amount
Forward contracts 329,187 (329,187 ) – – – –
Futures contracts 2,218,872 (1,060,257 ) 1,158,615 – – 1,158,615
Total 2,548,059 (1,389,444 ) 1,158,615 – – 1,158,615 Offsetting the Financial Liabilities and Derivative Liabilities
As of June 30, 2018
Gross Amounts Not Offset in the Statements of Financial Condition
Description Gross Amounts of Recognized Liabilities Gross Amounts Offset in the Statements of Financial Condition Net Amounts of Liabilities Presented in the Statements of Financial Condition Financial Instruments Cash Collateral Pledged (1) Net Amount
Forward contracts (551,553 ) 329,187 (222,366 ) – 222,366 –
Futures contracts (1,060,257 ) 1,060,257 – – – –
Total (1,611,810 ) 1,389,444 (222,366 ) – 222,366 – Offsetting the Financial Assets and Derivative
Assets
As of December 31, 2017 Gross Amounts Not Offset in the Statements of Financial Condition
Description Gross Amounts of Recognized Assets Gross Amounts Offset in the Statements of Financial Condition Net Amounts of Assets Presented in the Statements of Financial Condition Financial Instruments Cash Collateral Received (1) Net Amount
Forward contracts 2,248,858 (975,706 ) 1,273,152 – – 1,273,152
Futures contracts 5,145,538 (2,382,080 ) 2,763,458 – – 2,763,458
Total 7,394,396 (3,357,786 ) 4,036,610 – – 4,036,610 Offsetting the Financial Liabilities and Derivative Liabilities
As of December 31, 2017 Gross Amounts Not Offset in the Statements of Financial Condition
Description Gross Amounts of Recognized Liabilities Gross Amounts Offset in the Statements of Financial Condition Net Amounts of Liabilities Presented in the Statements of Financial Condition Financial Instruments Cash Collateral Pledged (1) Net Amount
Forward contracts (975,706 ) 975,706 – – – –
Futures contracts (2,382,080 ) 2,382,080 – – – –
Total (3,357,786 ) 3,357,786 – – – – (1) The Partnership posted additional collateral
of $8,513,574 for 2018 and $19,661,414 for 2017 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. |
