IMOS - Commodity/Option Trade

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Commodity/Option Trades are 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.

Commodity contracts are valued against the quoted forward rates for the route underlying the trade. Commodity Options are not being automatically valued against the underlying routes. Instead, you can create a Market for Commodity Options in which the Option Symbols can be quoted. Each Commodity Option contract will have a unique Option Symbol automatically generated. On the Market Data form, the quoted values of the trades can be recorded for each Option Symbol. Commodity - Option trades must have the associated configuration flag CFGCommodityMarket established with the correct commodity market. With this flag set the system limits your paper trading/settlement to one market. Physical contracts may still be set to multiple markets. 

Commodity/Option List

The Commodity/Option List includes all Commodity/Option Trades that you have the right to view. 

On the Trading menu

• You can select multiple Commodity/Options and confirm them at once by clicking the Confirm trade(s) link.

Commodity/Option Trade

Note: To edit Commodity/Option Trades, you must have the Record Trades Module Right selected.

To view an existing Commodity/Option Trade, on the Commodity/Option List, click its row or Trade ID link.

To create a new Commodity/Option Trade, do one of the following

• On the Commodity/Option List, click +.
• On the Trading menu 

  

  , under Trades, click Commodity/Option.

As with any other details view, you can navigate to a different record by clicking its card or return to the list by clicking its Name.

You can use tools on the toolbar to create, find, save, copy, or delete records.

• To copy a Commodity, click 

  

  . Enter the number of copies and then click Create. Edit line items for the copies as needed and then click OK.

The Commodity/Option Trade form is the same as an FFA/Option Trade, except the Index is always Commodity Symbol and, instead of a Route, you select the Symbol.

Enter contract details.

• Statuses:

  • Pending: The trade has been created. Contracts with a Pending status show as position in the Trading P&L Summary.

  • Opportunity: The trade can be included in the Trading Sensitivity Analysis to see how the P&L will look with this trade added.

  • Confirmed: Contracts with a Confirmed status appear in the Trading P&L Summary.
    Note: The Broker Confirmation Number is required to confirm a trade; it changes the Status to Confirmed. Someone with the Broker Confirmation Module Right selected in Security must enter the Broker Confirmation Number to confirm the trade and save it. Only paper trades that are confirmed can be settled for matured periods.

  • Partially Settled: The trade is partially settled.

  • Settled: The trade is fully settled.

• Reference: To edit this field, you must have the Reference Module Right selected in Security, under Trading.

• Settlement: For Period Average:

  • The period must be less than or equal to one month.

  • The settlement rate will be the forward rate for the month until the period is realized; then the settlement is the average of all spot rates in the period.

  • Early settlement is not allowed, since the true settlement rate is not available until the period is fully realized.

  • When using Realize Paper Trade Days Through the Month, the unrealized portion of the trade will use the forward rate for the month, and the realized portion will use an average of the spot rates in the realized period.

The grid on the bottom of the form populates with the Periods, the Market Rates, the Date that the Market Rate is from (Source), and the P&L (Exposure).

Exposure Tab

When you first enter a trade, periods in the future appear on the Exposure tab.

Settlement Tab

After a particular period of the trade has matured and the settlement rate has become available, that period moves to the Settlement tab.

The Trade must be refreshed for the periods to appear on the correct tab. To refresh, close the trade and reopen it.

These conditions both need to be fulfilled for this to happen:

• The period must have matured, that is, the month must be in the past, relative to the system date.

• The Settlement rate must be available; the Price field (Entire Month, Last 7 days, Last 10 days) on the Market Data form for a day during the trade's Settlement month must be available.
  If Entire Month is selected Entire Month values need to be imported into IMOS. If the Entire Month value for the route is not in IMOS the status of the trade will not be able to be set to realized. 

Months Tab

Monthly information appears on the Months tab.

Linked Trades Tab

Note: Configuration flags CFGLinkPapertoPaper and CFGLinkedTradeTypes must be enabled.

On the Linked Trades tab of each paper trade form, the Linked Trades grid enables you to link this trade to other paper and physical trades.

The grid at the top of the tab enables you to capture any paper trades that the contract is using to hedge. The Contracts grid enables you to capture any trades that are using this contract as a hedge.

Example: If you have an FFA trade, and there is bunker exposure associated with the calculation that you would want to hedge, then you would use the top grid and select a Bunker Swap. If you have a Cargo contract that has freight exposure and you want to hedge to an FFA, then this Cargo contract would show up in the Contracts grid of that FFA.

On either grid, you can:

• Add New Row: To add a linked trade, add a new row and then enter the trade information.

• Right-click a line item and then click:

  • See Trade Details: Opens the trade details

  • Insert: Inserts a row for a new linked trade

  • Delete: Deletes the link to the trade