IMOS On-Prem - Paper Positions

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The Trading module manages paper positions. Paper contracts are financial derivatives. The Trading module allows users to enter the following trades and to post commission and settlement invoices. Paper Trades will show day or ton exposure in each month that is part of the trade.

Forward Freight Agreement (FFA): A swap on one of the Baltic issued published routes or indices. Two parties agree between themselves a Period and a Contract rate and, depending on the average published spot rates of the agreed period at the time of settlement, if:
- Contract Rate > Market Rate: the buyer will pay the seller (Contract Rate-Market Rate)*Days Agreed
- Contract Rate < Market Rate: the seller will pay the buyer (Market Rate-Contract Rate)*Days Agreed
FFA Option: The buyer pays the Premium to the seller in order to obtain the right, but not the obligation, to settle an FFA with Contract Rate=Strike Price at the time of settlement. The buyer will only exercise an FFA option if this is in his favor. If the FFA Option is an Option to obtain a long (buy) FFA position, then this is a Call Option. If the FFA Option is an Option to obtain a short (sell) FFA position, then this is a Put Option.
Bunker Swap: Similar to an FFA with the difference that the underlying index is a bunker price index rather than a freight index.
Bunker Option: Similar to an FFA Option with the difference that the underlying index is a bunker price index rather than a freight index.
Commodity/Option: Nonfreight derivatives that are traded as hedges to your company's overall exposure. These trades (for example, crude oil, iron ore, and coal) are meant to hedge risk to overall market fluctuations that may impact your commodity desk and in turn, impact the freight book. Commodity/Option Trades can be represented as buys/sells with a simple Quantity and Price. They reference market data for P&L and settlement in the exact same way as FFAs.

The following rules determine when a Paper Trade leaves exposure:

The period need must have matured, that is, the month must be in the past, relative to the system date.
The Settlement rate must be available, that is, the Price (Entire Month, Last 7 days, Last 10 days) on the Market Data form for a day during that month that matches the trade's Settlement field must be available. Ensure that the settlement rate for that particular trade is available.