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 Topic of the Accounting Standards Codification (“ASC”), nor are they used for other risk management purposes. The Advisor and General Partner actively assess, manage and monitor risk exposure on derivatives on a contract basis, a sector basis (e.g., interest rate derivatives, agricultural derivatives, etc.), and on an overall basis in accordance with established risk parameters. Due to the speculative nature of the Partnership’s derivative trading activity, the Partnership is subject to the risk of substantial losses from derivatives trading. The following presents the fair value of derivatives contracts at December 31, 2023 and 2022. 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. Schedule of fair value of derivative contracts December 31, 2023 Assets Liability Type of Derivatives Derivatives Net Derivatives Contracts Fair Value Fair Value Fair Value Futures Contracts Agriculture $ 171,417 $ (43,396 ) $ 128,021 Currencies 19,038 (36,536 ) (17,498 ) Energies 14,100 (33,976 ) (19,876 ) Interest Rates 9,078 (54,525 ) (45,447 ) Metals 82,003 (68,776 ) 13,227 Stock Indices 50,459 (45,990 ) 4,469 Total Futures Contracts $ 346,095 $ (283,199 ) $ 62,896 Forward Currency Contracts $ 7,872 $ (23,660 ) $ (15,788 ) Total Gross Fair Value of Derivatives Contracts $ 353,967 $ (306,859 ) $ 47,108 December 31, 2022 Assets Liability Type of Derivatives Derivatives Net Derivatives Contracts Fair Value Fair Value Fair Value Futures Contracts Agriculture $ 179,097 $ (33,772 ) $ 145,325 Currencies 6,043 (86,052 ) (80,009 ) Energy 44,450 (27,276 ) 17,174 Interest Rates 204,350 (7,266 ) 197,084 Metals 59,119 (28,167 ) 30,952 Stock Indices 20,615 (41,930 ) (21,315 ) Total Futures Contracts $ 513,674 $ (224,463 ) $ 289,211 Forward Currency Contracts $ 21,701 $ (7,221 ) $ 14,480 Total Gross Fair Value of Derivatives Contracts $ 535,375 $ (231,684 ) $ 303,691 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 years ended December 31, 2023, 2022 and 2021. 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. Schedule of realized and unrealized gain (loss) on derivatives Year Ended December 31, 2023 Type of Change in Average Notional Derivatives Contracts Realized Unrealized Value of Contracts Futures Contracts Agriculture $ 886,515 $ (17,304 ) Currencies 140,276 62,511 Energies 215,437 (37,050 ) Interest Rates 128,510 (242,531 ) Metals (160,628 ) (17,725 ) Stock Indices 164,321 25,784 Total Futures Contracts $ 1,374,431 $ (226,315 ) $ 45,880,739 (1) Forward Currency Contracts $ 97,910 $ (30,268 ) $ 3,191,100 (2) Total Gain (loss) from Derivatives Contracts $ 1,472,341 $ (256,583 ) Year Ended December 31, 2022 Type of Derivatives Contracts Realized Change in Unrealized Average Notional Value of Contracts Futures Contracts Agriculture $ 35,442 $ 161,839 Currencies 1,176,414 (69,083 ) Energies 879,081 10,116 Interest Rates 1,414,280 195,928 Metals 140,257 65,510 Stock Indices (495,282 ) (74,281 ) Total Futures Contracts $ 3,150,192 $ 290,029 $ 42,530,145 (1) Forward Currency Contracts $ (98,381 ) $ 5,950 $ 4,398,771 (2) Total Gain from Derivatives Contracts $ 3,051,811 $ 295,979 Year Ended December 31, 2021 Type of Change in Average Notional Derivatives Contracts Realized Unrealized Value of Contracts Futures Contracts Agriculture $ 1,426,339 $ (349,582 ) Currencies 264,845 (141,651 ) Energies 1,409,280 (50,116 ) Interest Rates (1,048,470 ) (76,327 ) Metals 486,869 (381,615 ) Stock Indices 1,052,890 (125,821 ) Total Futures Contracts $ 3,591,753 $ (1,125,112 ) $ 66,363,208 (1) Forward Currency Contracts $ (3,811 ) $ (50,853 ) $ 7,666,999 (2) Total Gain (loss) from Derivatives Contracts $ 3,587,942 $ (1,175,965 ) 1) The average notional value of futures contracts are representative of the Partnership's volume of derivative activity for futures contracts during the respective years. 2) The average notional value of forward currency contracts are representative of the Partnership's volume of derivative activity for forward currency contracts during the respective years. 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 Schedule of offsetting the financial assets and derivative assets As of December 31, 2023 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 $ 7,872 $ (7,872 ) $ – $ – $ – $ – Total $ 7,872 $ (7,872 ) $ – $ – $ – $ – Offsetting the Financial Liabilities and Derivative Liabilities As of December 31, 2023 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 $ 23,660 $ (7,872 ) $ 15,788 $ – $ (15,788 ) $ – Total $ 23,660 $ (7,872 ) $ 15,788 $ – $ (15,788 ) $ – Offsetting the Financial Assets and Derivative Assets As of December 31, 2022 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 $ 21,701 $ (7,221 ) $ 14,480 $ – $ – $ 14,480 Total $ 21,701 $ (7,221 ) $ 14,480 $ – $ – $ 14,480 Offsetting the Financial Liabilities and Derivative Liabilities As of December 31, 2022 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 $ 7,221 $ (7,221 ) $ – $ – $ – $ – Total $ 7,221 $ (7,221 ) $ – $ – $ – $ – (1) The Partnership posted additional collateral of $62,019 as of December 31, 2023 and $108,370 for December 31, 2022 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. |