| 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 September 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.
September 30, 2018
Asset Liability
Type of Derivatives Derivatives Net
Derivatives Contracts Fair Value Fair Value Fair Value
Futures Contracts*
Agriculture $ 648,014 $ (297,475 ) $ 350,539
Currencies 789,915 (115,861 ) 674,054
Energy 448,115 (165,524 ) 282,591
Interest Rates 132,349 (539,212 ) (406,863 )
Metals 963,242 (773,158 ) 190,084
Stock Indices 321,888 (21,593 ) 300,295
Treasury Rates 135,422 (281,728 ) (146,306 )
$ 3,438,945 $ (2,194,551 ) $ 1,244,394
Forward Currency Contracts $ 403,251 $ (503,771 ) $ (100,520 )
Total Gross Fair Value of Derivatives Contracts $ 3,842,196 $ (2,698,322 ) $ 1,143,874
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
* Futures contracts include settled variation margin. 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, 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 September 30, 2018
Type of Change in Number of
Derivatives Contracts Realized Unrealized Contracts Closed
Futures Contracts
Agricultural $ 929,911 $ 40,651
Currencies 773,418 189,211
Energy 204,031 (752,340 )
Interest Rates 424,133 (1,113,977 )
Metals 1,861,140 (309,872 )
Stock Indices (111,857 ) 437,411
Treasury Rates (9,906 ) (144,703 )
$ 4,070,870 $ (1,653,619 ) 8,141 (1)
Forward Currency Contracts $ (1,087,650 ) $ 121,846 (2)
Total gain (loss) from derivatives contracts $ 2,983,220 $ (1,531,773 )
Nine Months ended September 30, 2018
Type of Change in Number of
Derivatives Contracts Realized Unrealized Contracts Closed
Futures Contracts
Agricultural $ 1,142,879 $ (41,628 )
Currencies (2,710,019 ) 1,058,945
Energy 3,026,609 (534,050 )
Interest Rates 571,639 (169,555 )
Metals 3,312,355 (1,801,326 )
Stock Indices (200,802 ) (228,950 )
Treasury Rates 14,024 (251,548 )
$ 5,156,685 $ (1,968,112 ) 31,052 (1)
Forward Currency Contracts $ 156,817 $ (1,373,672 ) (2)
Total gain (loss) from derivatives contracts $ 5,313,502 $ (3,341,784 ) (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 nine months ended September 30, 2018 were 273,016, and 299,964, respectively. The numbers of short
contracts closed using average cost for average cost for the three and nine months ended September 30, 2018 were (225,878), and
(272,833), 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 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) 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, 2017 were 447,638, and
465,862, respectively. The numbers of short contracts closed using average cost for average cost for the three and nine months
ended September 30, 2017 were (348,468), and (362,838), 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
Gross Amounts Not Offset in the Statements of Financial Condition
As of September 30, 2018
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 403,251 (403,251 ) – – – –
Futures contracts* 1,950,038 (1,522,409 ) 427,629 – – 427,629
Total 2,353,289 (1,925,660 ) 427,629 – – 427,629 Offsetting the Financial Liabilities and Derivative Liabilities
Gross Amounts Not Offset in the Statements of Financial Condition
As of September 30, 2018
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 (503,771 ) 403,251 (100,520 ) – 100,520 –
Futures contracts* (1,522,409 ) 1,522,409 – – – –
Total (2,026,180 ) 1,925,660 (100,520 ) – 100,520 – Offsetting the Financial Assets and Derivative Assets
Gross Amounts Not Offset in the Statements of Financial Condition
As of December 31, 2017
Description Gross Amounts of Recognized Assets Gross Amount 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
Gross Amounts Not Offset in the Statements of Financial Condition
As of December 31, 2017
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 $8,326,527 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. * Futures contracts excludes settled variation margin. |
