7. FINANCIAL DERIVATIVE INSTRUMENTS

9 Months Ended

Sep. 30, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

FINANCIAL DERIVATIVE INSTRUMENTS

NOTE 7 - FINANCIAL DERIVATIVE INSTRUMENTS

The Partnership engages in the speculative trading of futures 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 derivative contracts as of September 30, 2019 and December 31, 2018. The fair value of derivative contracts is presented as an asset if in a gain position and a liability if in a loss position. The derivative contracts qualify for net presentation in the Statements of Financial Condition, however fair value is presented on a gross basis in the table below.

September 30, 2019
	Asset		Liability
Type of	Derivatives		Derivatives			Net
Futured Contracts	Fair Value		Fair Value			Fair Value
Futures Contracts
Currencies	$	15,650	$	(1,578	)	$	14,072
Energy		20,848		(1,803	)		19,045
Interest Rates		8,011		(24,422	)		(16,411	)
Metals		84,935		–			84,935
Stock Indices		5,825		(27,925	)		(22,100	)
Treasury Rates		4,451		–			4,451
	$	139,720	$	(55,728	)	$	83,992

December 31, 2018
		Asset		Liability
Type of		Derivatives		Derivatives			Net
Futured Contracts		Fair Value		Fair Value			Fair Value
Futures Contracts
Currencies	$	5,351	$	(6,611	)	$	(1,260	)
Energy		–		(60,238	)		(60,238	)
Interest Rates		30,959		(4,148	)		26,811
Metals		15,310		–			15,310
Stock Indices		17,604		(87,631	)		(70,027	)
Treasury Rates		402		(8,746	)		(8,344	)
	$	69,626	$	(167,374	)	$	(97,748	)

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, 2019 and 2018.

The below captions of “Realized” and “Change in Unrealized” correspond to the captions in the Statements of Income (Loss) for gain (loss) on trading derivatives contracts.

Three Months Ended September 30, 2019
Type of				Change in
Futured Contracts	Realized			Unrealized
Futures Contracts
Currencies	$	106,751		$	14,487
Energy		38,361			22,565
Interest Rates		(398,124	)		(6,153	)
Metals		(245,120	)		(137,051	)
Stock Indices		452,845			(73,570	)
Treasury Rates		(7,282	)		28,811
	$	(52,569	)	$	(150,911	)

For the three months ended September 30, 2019, the number of futures contracts closed was 3,299. These closed contract amounts are representative of the Partnership’s volume of derivative activity during the period.

Nine Months Ended September 30, 2019
Type of				Change in
Futured Contracts	Realized			Unrealized
Futures Contracts
Currencies	$	(78,732	)	$	15,332
Energy		10,447			79,283
Interest Rates		(200,584	)		(43,222	)
Metals		108,736			69,625
Stock Indices		(1,798,537	)		47,927
Treasury Rates		186,552			12,795
	$	(1,772,118	)	$	181,740

For the nine months ended September 30, 2019, the number of futures contracts closed was 7,766. These closed contract amounts are representative of the Partnership’s volume of derivative activity during the period.

Three Months Ended September 30, 2018
Type of				Change in
Futures Contracts	Realized			Unrealized
Futures Contracts*
Currencies	$	165,850		$	260,124
Energy		289,776			(327,810	)
Interest Rates		(83,056	)		(84,226	)
Metals		224,487			26,705
Stock Indices		(1,057,407	)		146,245
Treasury Rates		(84,115	)		106,253
	$	(544,465	)	$	127,291

For the three months ended September 30, 2018, the number of futures contracts closed was 5,690. These closed contract amounts are representative of the Partnership’s volume of derivative activity during the period.

Nine Months Ended September 30, 2018
Type of				Change in
Futures Contracts	Realized			Unrealized
Futures Contracts*
Currencies	$	647,408		$	228,487
Energy		505,565			69,451
Interest Rates		384,867			(5,153	)
Metals		579,631			(311,073	)
Stock Indices		(3,203,304	)		333,685
Treasury Rates		(323,938	)		(85,789	)
	$	(1,409,771	)	$	229,608
*Futures contracts include settled variation margin.

For the nine months ended September 30, 2018, the number of futures contracts closed was 15,773. These closed contract amounts are representative of the Partnership’s volume of derivative activity during the period.

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.

The following table summarizes the disclosure requirements for offsetting assets and liabilities:

Offsetting the Financial Assets and Derivative Assets
As of September 30, 2019					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
Futures Contracts*	105,961	(42,795	)	63,166		–	–	63,166

Offsetting the Financial Liabilities and Derivative Liabilities
As of September 30, 2019					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
Futures Contracts*	(42,795	)	42,795	–	–	–	–

Offsetting the Financial Assets and Derivative Assets
As of December 31, 2018				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
Futures Contracts*	46,809	(46,809)	–		–	–	–

Offsetting the Financial Liabilities and Derivative Liabilities
As of December 31, 2018						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
Futures Contracts*	(98,826	)	46,809	(52,017	)	–	52,017	–

(1) The Partnership posted additional collateral of $673,741 as of September 30, 2019 and $1,066,066 for December 31, 2018 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.