| Summary of Significant Accounting Policies | 6 Months Ended |
| Jun. 30, 2014 |
| Summary of Significant Accounting Policies | ' |
| 2. Summary of Significant Accounting Policies |
| The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). |
| The accompanying unaudited financial statements were prepared in accordance with U.S. GAAP for interim financial information and with the instructions for Form 10-Q and the rules and regulations of the SEC. In the opinion of management, all material adjustments, consisting only of normal recurring adjustments, considered necessary for a fair statement of the interim period financial statements have been made. Interim period results are not necessarily indicative of results for a full-year period. These financial statements and the notes thereto should be read in conjunction with the Fund’s financial statements included in the Fund’s Annual Report on Form 10-K for the year ended December 31, 2013. |
| Basis of Accounting |
| The accompanying financial statements have been prepared in conformity with U.S. GAAP. The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. |
| Futures Contracts |
| The Fund invests in commodity futures contracts. Upon execution of a futures contract, the Fund is obligated to deposit cash or eligible securities, also known as “initial margin,” into an account at its clearing broker. Generally investments in futures contracts also obligate the investor and the clearing broker to settle monies on a daily basis representing changes in the prior days “mark-to-market” of the open contracts. If the Fund has unrealized appreciation the clearing broker would credit the Fund’s account with an amount equal to appreciation and conversely if the Fund has unrealized depreciation the clearing broker would debit the Fund’s account with an amount equal to depreciation. These daily cash settlements are also known as “variation margin.” In lieu of posting variation margin daily, the Fund has deposited cash with the clearing broker, generally representing approximately twice the required initial margin to cover the initial margin and the daily changes in the market value of its futures investments. Cash held by the clearing broker to cover both margin requirements on open futures contracts is recognized as “Deposits with brokers” on the Statements of Financial Condition. |
| During the period the futures contract is open, changes in the value of the contract are recognized as an unrealized gain or loss by “marking-to-market” on a daily basis to reflect the changes in market value of the contract, which are recognized as a component of “Unrealized appreciation or depreciation on futures contracts” on the Statements of Financial Condition and “Change in net unrealized appreciation (depreciation) of futures contracts” on the Statements of Operations. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract on the closing date and the value of the contract when originally entered into, which is recognized as a component of “Net realized gain (loss) from futures contracts” on the Statements of Operations. |
| The Fund expects to invest only in long futures contracts. Some short futures positions may arise in futures contracts traded on the London Metal Exchange (“LME”) solely as the result of closing existing long LME futures positions. For every short LME futures contract outstanding, the Fund had previously entered into a long futures contract. The LME Clearing House is the counterparty for both the long and short positions. |
| Risks of investments in commodity futures contracts include possible adverse movement in the price of the commodities underlying the contracts, the possibility that there may not be a liquid secondary market for the contracts and the possibility that a change in the value of the contract may not correlate with a change in the value of the underlying commodities. |
| The average number of futures contracts outstanding during the six months ended June 30, 2014 and the fiscal year ended December 31, 2013 was as follows: |
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| | Six Months Ended | | | Year Ended | | | | | | | | | |
| June 30, 2014 | December 31, 2013 | | | | | | | | |
| Average number of futures contracts outstanding* | | | 2,834 | | | | 3,076 | | | | | | | | | |
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| * | The average number of contracts is calculated based on the number of contracts outstanding at the beginning of the fiscal year and at the end of each quarter within the current fiscal year. | | | | | | | | | | | | | | | |
| Refer to Note 3 – Derivative Instruments and Hedging Activities within these Notes to Financial Statements for further details on futures contracts activity. |
| Options Contracts |
| The Fund may write (sell) and purchase options on commodity futures and forward contracts to enhance the Fund’s risk-adjusted total return. When the Fund writes an option, an amount equal to the premium received is recognized as a component of “Call options written, at value” on the Statements of Financial Condition and is subsequently adjusted to reflect the current value of the written option until the option expires or the Fund enters into a closing purchase transaction. The changes in value of the options written during the reporting period are recognized as a component of “Change in net unrealized appreciation (depreciation) of call options written” on the Statements of Operations. When an option is exercised or expires, or the Fund enters into a closing purchase transaction, the difference between the net premium received and any amount paid at expiration or on executing a closing purchase transaction is recognized as a component of “Net realized gain (loss) from call options written” on the Statements of Operations. The Fund, as writer of an option, has no control over whether the underlying instrument may be sold (called) and as a result bears the risk of an unfavorable change in the market value of the instrument underlying the written option. There is also the risk the Fund may not be able to enter into a closing transaction because of an illiquid market. During the six months ended June 30, 2014 and the fiscal year ended December 31, 2013, the Fund wrote call options on futures contracts. |
| The Fund did not purchase options on futures or forward contracts during the six months ended June 30, 2014 and the fiscal year ended December 31, 2013. The purchase of options involves the risk of loss of all or part of the cash paid for the options (the premium). The market risk associated with purchasing options is limited to the premium paid. The counterparty credit risk of purchasing options, however, needs to take into account the current value of the option, as this is the performance expected from the counterparty. |
| Transactions in call options written during the six months ended June 30, 2014 and the fiscal year ended December 31, 2013 were as follows: |
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| | | | | | | | | | | | | | | | |
| | | Six Months Ended | | | Year Ended | |
| 30-Jun-14 | December 31, 2013 |
| | Number of | | | Premiums | | | Number of | | | Premiums | |
| Contracts | Received | Contracts | Received |
| Outstanding, beginning of period | | | 1,377 | | | $ | 777,236 | | | | 1,537 | | | $ | 974,047 | |
| Options written | | | 4,836 | | | | 2,640,982 | | | | 10,128 | | | | 5,116,574 | |
| Options terminated in closing purchase transactions | | | (2,017 | ) | | | (1,032,883 | ) | | | (5,455 | ) | | | (2,788,807 | ) |
| Options expired | | | (1,850 | ) | | | (1,233,505 | ) | | | (3,897 | ) | | | (2,058,351 | ) |
| Options exercised | | | (979 | ) | | | (541,559 | ) | | | (936 | ) | | | (466,227 | ) |
| | | | | | | | | | | | | | | | |
| Outstanding, end of the period | | | 1,367 | | | $ | 610,271 | | | | 1,377 | | | $ | 777,236 | |
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| The average number of call options written outstanding during the six months ended June 30, 2014 and the fiscal year ended December 31, 2013 was as follows: |
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| | Six Months Ended | | | Year Ended | | | | | | | | | |
| 30-Jun-14 | December 31, 2013 | | | | | | | | |
| Average number of call options written outstanding* | | | 1,370 | | | | 1,452 | | | | | | | | | |
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| * | The average number of contracts is calculated based on the outstanding number of contracts at the beginning of the fiscal year and at the end of each quarter within the current fiscal year. | | | | | | | | | | | | | | | |
| Refer to Note 3 – Derivative Instruments and Hedging Activities within these Notes to Financial Statements for further details on options activity. |
| Forward Contracts |
| The Fund may enter into forward contracts but did not make any such investments during the six months ended June 30, 2014 and the fiscal year ended December 31, 2013. A forward contract is an agreement between two parties to purchase or sell a specified quantity of a commodity at or before a specified date in the future at a specified price. Forward contracts are typically traded in the over-the-counter (“OTC”) markets and all details of the contract are negotiated between the counterparties to the agreement. Accordingly, the forward contracts are valued by reference to the contracts traded in the OTC markets. |
| The contractual obligations of a buyer or seller may generally be satisfied by taking or making physical delivery of the underlying commodity, establishing an opposite position in the contract and recognizing the profit or loss on both positions simultaneously on the delivery date or, in some instances, paying a cash settlement before the designated date of delivery. The forward contracts are adjusted by the daily fluctuation of the underlying commodity or currency and any gains or losses are recognized on the Statements of Operations as unrealized appreciation or depreciation until the contract settlement date. |
| Forward contracts are, in general, not cleared or guaranteed by a third party. The Fund may collateralize forward commodity contracts with cash and/or certain securities as indicated on its Statements of Financial Condition or Schedule of Investments, when applicable, and such collateral is held for the benefit of the counterparty in a segregated account at the custodian to protect the counterparty against non-payment by the Fund. In the event of a default by the counterparty, the Fund will seek return of this collateral and may incur certain costs exercising its right with respect to the collateral. |
| The Fund remains subject to credit risk with respect to the amount it expects to receive from counterparties, as those amounts are not similarly collateralized by the counterparty. If a counterparty becomes bankrupt or otherwise fails to perform its obligations due to financial difficulties, the Fund may experience significant delays in obtaining any recovery in a bankruptcy or other reorganization proceeding. The Fund may obtain only limited recovery or may obtain no recovery in such circumstances. |
| Participants in trading foreign exchange forward contracts often do not require margin deposits, but rely upon internal credit limitations and their judgments regarding the creditworthiness of their counterparties. |
| The Fund will enter into forward contracts only with large, well-capitalized and well-established financial institutions. The creditworthiness of each of the firms which is a party to a forward contract is monitored by the Manager. |
| Netting Agreements |
| In the ordinary course of business, the Fund has entered into transactions subject to enforceable master repurchase agreements or other similar arrangements (“netting agreements”). Generally, the right to offset in netting agreements allows the Fund to offset any exposure to a specific counterparty with any collateral received or delivered to that counterparty based on the terms of the agreements. The Fund manages its cash collateral and securities collateral on a counterparty basis. As of June 30, 2014 and December 31, 2013, the Fund was not invested in any portfolio securities or derivatives, other than the repurchase agreements further described below, that are subject to netting agreements. |
| Repurchase Agreements |
| In connection with transactions in repurchase agreements, it is the Fund’s policy that its custodian take possession of the underlying collateral securities, the fair value of which exceeds the principal amount of the repurchase transaction, including accrued interest, at all times. If the counterparty defaults, and the fair value of the collateral declines, realization of the collateral may be delayed or limited. |
| The following tables present the repurchase agreements for the Fund, presented on the Statements of Financial Condition as of June 30, 2014 and December 31, 2013, and recognized as a component of “Short-term investments, at value,” that are subject to netting agreements as of the end of each reporting period, and the collateral delivered related to those repurchase agreements. |
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| | | | | | | | | | | | | | | | |
| | 30-Jun-14 | |
| | Counterparty | | | Short-Term | | | Collateral Pledged | | | Net | |
| Investments, | (From) | Exposure |
| at Value | Counterparty* | |
| Repurchase Agreements | | | State Street Bank | | | $ | 6,530,115 | | | $ | (6,530,115 | ) | | $ | — | |
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| | 31-Dec-13 | |
| | Counterparty | | | Short-Term | | | Collateral Pledged | | | Net | |
| Investments, | (From) | Exposure |
| at Value | Counterparty* | |
| Repurchase Agreements | | | State Street Bank | | | $ | 1,575,280 | | | $ | (1,575,280 | ) | | $ | — | |
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| * | As of June 30, 2014 and December 31, 2013, the value of the collateral pledged from the counterparty exceeded the value of the repurchase agreements. Refer to the Schedule of Investments for details on the repurchase agreements. | | | | | | | | | | | | | | | |
| Collateral Investments |
| Currently, approximately 15% of the Fund’s net assets are committed to secure the Fund’s futures contract positions. These assets are placed in a commodity futures account maintained by the Fund’s clearing broker, and are held in high-quality instruments permitted under CFTC regulations. |
| The Fund’s remaining assets are held in a separate collateral investment account managed by the Collateral Sub-adviser. The Fund’s assets held in the separate collateral account are invested in cash equivalents, U.S. government securities and other high-quality short-term debt securities with final terms not exceeding one year at the time of investment. The collateral portfolio’s debt securities (other than U.S. government securities) are rated at the highest applicable rating as determined by at least one nationally recognized statistical rating organization, or if unrated, judged by the Collateral Sub-adviser to be of comparable quality. |
| Investment Valuation |
| Commodity futures contracts and options on commodity futures contracts traded on an exchange will be valued at the final settlement price or official closing price as determined by the principal exchange on which the instruments are traded as supplied by independent pricing services. These investments are generally classified as Level 1 for fair value measurement purposes. OTC commodity futures and forward contracts and options on commodity futures and forward contracts not traded on an exchange will be valued, in order of hierarchy, by independent pricing services, price quotations obtained from counterparty broker-dealers, or through fair valuation methodologies as determined by the Manager. These investments are generally classified as Level 2. Additionally, events may occur after the close of the market, but prior to the determination of the Fund’s net asset value, that may affect the values of the Fund’s investments. In such circumstances, the Manager will determine a fair valuation for such investments that in its opinion is reflective of fair market value. These investments are generally classified as Level 2 or Level 3 depending on the priority of the significant inputs. |
| Prices of fixed-income securities, including, but not limited to, highly-rated agency discount notes and U.S. Treasury bills, are provided by a pricing service approved by the Fund’s Manager. These securities are generally classified as Level 2. The pricing service establishes a security’s fair value using methods that may include consideration of the following: yields or prices of investments of comparable quality, type of issue, coupon, maturity and rating, market quotes or indications of value from security dealers, general market conditions and other information and analysis, including the obligor’s credit characteristics considered relevant. These securities are generally classified as Level 2 or Level 3 depending on the priority of the significant inputs. |
| Repurchase agreements are valued at contract amount plus accrued interest, which approximates market value. These securities are generally classified as Level 2. |
| Fair Value Measurements |
| Fair value is defined as the price that the Fund would receive upon selling an investment or transferring a liability in an orderly transaction to an independent buyer in the principal or most advantageous market for the investment. A three-tier hierarchy is used to maximize the use of observable market data and minimize the use of unobservable inputs and to establish classification of fair value measurements for disclosure purposes. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability. Observable inputs are based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability. Unobservable inputs are based on the best information available in the circumstances. The following is a summary of the three-tier hierarchy of valuation inputs. |
| Level 1—Inputs are unadjusted and prices are determined by quoted prices in active markets for identical securities. |
| Level 2—Prices are determined using other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.). |
| Level 3—Prices are determined using significant unobservable inputs (including management’s assumptions in determining the fair value of investments). |
| The inputs or methodologies used for valuing securities are not an indication of the risks associated with investing in those securities. The following is a summary of the Fund’s fair value measurements as of June 30, 2014 and December 31, 2013: |
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| | 30-Jun-14 | |
| | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
| Short-Term Investments: | | | | | | | | | | | | | | | | |
| U.S. Government and Agency Obligations | | $ | — | | | $ | 137,154,095 | | | $ | — | | | $ | 137,154,095 | |
| Repurchase Agreements | | | — | | | | 6,530,115 | | | | — | | | | 6,530,115 | |
| Investments in Derivatives: | | | | | | | | | | | | | | | | |
| Futures Contracts* | | | 1,904,534 | | | | — | | | | — | | | | 1,904,534 | |
| Call Options Written** | | | (534,742 | ) | | | (37,942 | ) | | | — | | | | (572,684 | ) |
| | | | | | | | | | | | | | | | |
| Total | | $ | 1,369,792 | | | $ | 143,646,268 | | | $ | — | | | $ | 145,016,060 | |
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| |
| | 31-Dec-13 | |
| | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
| Short-Term Investments: | | | | | | | | | | | | | | | | |
| U.S. Government and Agency Obligations | | $ | — | | | $ | 139,663,104 | | | $ | — | | | $ | 139,663,104 | |
| Repurchase Agreements | | | — | | | | 1,575,280 | | | | — | | | | 1,575,280 | |
| Investments in Derivatives: | | | | | | | | | | | | | | | | |
| Futures Contracts | | | 1,879,014 | | | | — | | | | — | | | | 1,879,014 | |
| Call Options Written | | | (779,835 | ) | | | (249,932 | ) | | | — | | | | (1,029,767 | ) |
| | | | | | | | | | | | | | | | |
| Total | | $ | 1,099,179 | | | $ | 140,988,452 | | | $ | — | | | $ | 142,087,631 | |
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| * | Represents net unrealized appreciation (depreciation) as reported in the Schedule of Investments. | | | | | | | | | | | | | | | |
| ** | Refer to the Schedule of Investments for a breakdown of call options written classified as Level 2, which is comprised of the Fund’s call options written on the LME. | | | | | | | | | | | | | | | |
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| The Manager is responsible for the Fund’s valuation process and has delegated daily oversight of the process to the Manager’s Valuation Committee. The Valuation Committee, pursuant to its valuation policies and procedures, is responsible for making fair value determinations, evaluating the effectiveness of the Fund’s pricing policies, and reporting to the Manager’s senior management. The Valuation Committee is aided in its efforts by the Manager’s Securities Valuation Team, which is responsible for administering the daily valuation process and applying fair value methodologies as approved by the Valuation Committee. When determining the reliability of independent pricing services for investments owned by the Fund, the Valuation Committee, among other things, conducts due diligence reviews of the pricing services and monitors the quality of security prices received through various testing reports conducted by the Securities Valuation Team. |
| For each portfolio instrument that has been fair valued pursuant to the Valuation Committee’s policies, the fair value price is compared against the last available and next available market quotations. The Valuation Committee reviews the results of such testing and fair valuation occurrences are reported to the Manager’s senior management. |
| Investment Transactions |
| Investment transactions are recorded on a trade date basis. Realized gains and losses from investment transactions are determined on the specific identification method, which is the same for federal income tax purposes. |
| Investment Income |
| Interest income, which reflects the amortization of premiums and includes accretion of discounts for financial reporting purposes, is recorded on an accrual basis. |
| Brokerage Commissions and Fees |
| The Fund pays brokerage commissions, including applicable clearing costs, exchange fees, NFA fees, give-up fees, pit brokerage fees and other transaction-related fees and expenses, incurred in connection with its commodity trading activities. |
| Income Taxes |
| No provision for federal, state, and local income taxes has been made in the accompanying financial statements because the Fund has elected to be classified as a partnership for U.S. federal income tax purposes. Each owner of the Fund’s shares will be required to take into account its allocable share of the Fund’s income, gains, losses, deductions and other items for the Fund’s taxable year. |
| For all open tax years and all major taxing jurisdictions, the Manager of the Fund has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. Open tax years are those that are open for examination by taxing authorities (i.e., generally the last four tax year ends and the interim tax period since then). Furthermore, the Manager of the Fund is also not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months. |
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| Expense Recognition |
| All expenses of the Fund are recognized on an accrual basis. The Fund pays all routine and extraordinary costs and expenses of its operations, brokerage expenses, custody fees, transfer agent expenses, professional fees, expenses of preparing, printing and distributing reports, notices, information statements, proxy statements, reports to governmental agencies, and taxes, if any. |
| Calculation of Net Asset Value |
| The net asset value per share of the Fund on any given day is computed by dividing the value of all assets of the Fund (including any accrued interest), less all liabilities (including accrued expenses and distributions declared but unpaid), by the total number of shares outstanding. |
| Distributions |
| The Fund intends to make regular monthly distributions to its shareholders stated in terms of a fixed cents per share distribution rate. Among other factors, the Manager seeks to establish a distribution rate that roughly corresponds to its projections of the total return that could reasonably be expected to be generated by the Fund over an extended period of time. In the event that the amount of income earned or capital gains realized by the Fund is not sufficient to cover the Fund’s distributions, the Fund may be required to liquidate investments to fund distributions at times or on terms that are disadvantageous to the Fund and its shareholders. As market conditions and portfolio performance may change, the rate of distribution on the shares and the Fund’s distribution policy could change. The Manager reserves the right to change the Fund’s distribution policy and the basis for establishing the rate of the Fund’s monthly distributions, or may temporarily suspend or reduce distributions without a change in policy, at any time and may do so without prior notice to shareholders. |
| Distributions to shareholders are recorded on the ex-dividend date. |
| Commitments and Contingencies |
| Under the Fund’s organizational documents, the Manager, Wilmington Trust Company (the Fund’s Delaware trustee) and the Manager’s Independent Committee members are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, in the normal course of business, the Fund enters into contracts that provide general indemnifications to other parties. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. However, the Fund has not had prior claims or losses pursuant to these contracts and believes the risk of loss to be remote. |
| Financial Instrument Risk |
| The Fund utilizes commodity futures and options, whose values are based upon an underlying asset and generally represent future commitments that have a reasonable possibility of being settled in cash or through physical delivery. As of June 30, 2014 and December 31, 2013, the financial instruments held by the Fund were traded on an exchange and are standardized contracts. |
| Market risk is the potential for changes in the value of the financial instruments traded by the Fund due to market changes, including fluctuations in commodity prices. Investing in commodity futures and forward contracts involves the Fund entering into contractual commitments to purchase or sell a particular commodity at a specified date and price. The market risk associated with the Fund’s commitments to purchase commodities will be limited to the gross or face amount of the contracts held. The Fund’s exposure to market risk may be influenced by a number of factors, including changes in international balances of payments and trade, currency devaluations and revaluations, changes in interest and foreign currency exchange rates, price volatility of commodity futures and forwards contracts and market liquidity, weather, geopolitical events and other factors. These factors also affect the Fund’s investments in options on commodity futures and forward contracts. The inherent uncertainty of the Fund’s investments as well as the development of drastic market occurrences could ultimately lead to a loss of all, or substantially all, of investors’ capital. |
| Credit risk is the possibility that a loss may occur due to failure of a counterparty performing according to the terms of the forwards, futures and option contracts. The Fund may be exposed to credit risk from its investments in commodity futures and forward contracts and options on commodity futures and forward contracts resulting from the clearing house associated with a particular exchange failing to meet its obligations to the Fund. In general, clearing houses are backed by their corporate members who may be required to share in the financial burden resulting from the nonperformance of one of their members, which should significantly reduce this credit risk. In cases where the clearing house is not backed by the clearing members (i.e., as in some foreign exchanges), it may be backed by a consortium of banks or other financial institutions. There can be no assurance that any counterparty, clearing member or clearing house will meet its obligations to the Fund. |
| The commodity markets have volatility risk. The commodity markets have experienced periods of extreme volatility. General market uncertainty and consequent repricing risk have led to market imbalances of sellers and buyers, which in turn have resulted in significant reductions in values of a variety of commodities. Similar future market conditions may result in rapid and substantial valuation increases or decreases in the Fund’s holdings. In addition, volatility in the commodity and securities markets may directly and adversely affect the setting of distribution rates on the Fund’s shares. |
