Derivative Instruments

3 Months Ended

12 Months Ended

Mar. 31, 2018

Dec. 31, 2017

Note 10. Derivative Instruments

The Partnership follows the provisions of FASB ASC 815, Derivatives and Hedging. FASB ASC 815 is intended to improve transparency in financial reporting by requiring enhanced disclosures of an entity’s derivative instruments and hedging activities and their effects on the entity’s financial position, financial performance, and cash flows. FASB ASC 815 applies to all derivative instruments within the scope of FASB ASC 815-10-05. It also applies to non-derivative hedging instruments and all hedged items designated and qualifying as hedges under FASB ASC 815-10-05. FASB ASC 815 amends the current qualitative and quantitative disclosure requirements for derivative instruments and hedging activities set forth in FASB ASC 815-10-05 and generally increases the level of disaggregation that will be required in an entity’s financial statements. FASB ASC 815 requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements (see Trading Activities and Related Risks, Note 8).

The Partnership’s business is speculative trading. The Partnership intends to close out all futures, options on futures and forward contracts prior to their expiration. The Partnership trades in futures and other commodity interest contracts and is therefore a party to financial instruments with elements of off-balance sheet market risk and credit risk. In entering into these contracts, the Partnership faces the market risk that these contracts may be significantly influenced by market conditions, such as interest rate volatility, resulting in such contracts being less valuable. The Partnership minimizes market risk through real-time monitoring of open positions, diversification of the portfolio and maintenance of a margin-to-equity ratio that rarely exceeds 25%.

In addition to market risk, in entering into commodity interest contracts there is a credit risk that a counterparty will not be able to meet its obligations to the Partnership. In general, clearing organizations are backed by the corporate members of the clearing organization who are required to share any financial burden resulting from the non-performance by one of their members and, as such, should significantly reduce this credit risk. In cases in which the clearing organization is not backed by the clearing members, like some non-U.S. exchanges, it is normally backed by a consortium of banks or other financial institutions.

In the case of forward contracts, over-the-counter options contracts or swap contracts, which are traded on the interbank or other institutional market rather than on exchanges, the counterparty is generally a single bank or other financial institution, rather than a central clearing organization backed by a group of financial institutions. As a result, there will likely be greater counterparty credit risk in these transactions. The Partnership trades only with those counterparties that it believes to be creditworthy. Nonetheless, the clearing member, clearing organization or other counterparty to these transactions may not be able to meet its obligations to the Partnership, in which case the Partnership could suffer significant losses on these contracts.

The Partnership does not designate any derivative instruments as hedging instruments under FASB ASC 815-10-05.

For the three months ended March 31, 2018, the monthly average futures contracts bought and sold was 23,756 and the monthly average forward contracts bought and sold was 461. For the three months ended March 31, 2017, the monthly average futures contracts bought and sold was 45,903 and the monthly average forward contracts bought and sold was 435. The following tables summarize the quantitative information required by FASB ASC 815:

Fair Values of Derivative Instruments at March 31, 2018 and December 31, 2017


	Consolidated	Asset			Liability
	Statements of Financial	Derivatives			Derivatives
	Condition Location	3/31/2018			3/31/2018		Fair Value

Agricultural contracts	Net Unrealized gain (loss) on open futures contracts	$	74,110		$	(84,983)	$	(10,873)

Currencies contracts	Net Unrealized gain (loss) on open futures contracts		214,555			(224,284)		(9,729)

Energy contracts	Net Unrealized gain (loss) on open futures contracts		581,547			(64,603)		516,944
				.
Interest rates contracts	Net Unrealized gain (loss) on open futures contracts		972,293			(482,616)		489,677

Meats contracts	Net Unrealized gain (loss) on open futures contracts		82,091			(2,708)		79,383

Metals contracts	Net Unrealized gain (loss) on open futures contracts		512,038			(824,941)		(312,903)

Soft commodities contracts	Net Unrealized gain (loss) on open futures contracts		524,236			(57,668)		466,568

Stock indices contracts	Net Unrealized gain (loss) on open futures contracts		211,346			(789,887)		(578,541)

		$	3,172,216		$	(2,531,690)	$	640,526

Forward currency contracts	Net Unrealized gain (loss) on open forward currency contracts	$	397,363		$	(248,265)	$	149,098

Swap Contracts*	Net Unrealized gain (loss) on open swap contracts	$	2,113,139		$	(639,007)	$	1,474,132

*At March 31, 2018, the sector exposure of the CTA indices underlying the swaps was:

Deutsche Bank total return swap, termination date March 29, 2019
Agricultural contracts	3%
Energy contracts	5%
Interest rate contracts	68%
Metals contracts	2%
Stock indices contracts	5%
Forward currency contracts	17%
Total	100%

Deutsche Bank total return swap, termination date July 1, 2020
Interest rate contracts	46%
Stock indices contracts	11%
Forward currency contracts	43%
Total	100%


	Consolidated	Asset			Liability
	Statements of Financial	Derivatives			Derivatives
	Condition Location	12/31/2017			12/31/2017		Fair Value

Agricultural contracts	Net Unrealized gain (loss) on open futures contracts	$	192,152		$	(41,963)	$	150,189

Currencies contracts	Net Unrealized gain (loss) on open futures contracts		607,592			(214,009)		393,583

Energy contracts	Net Unrealized gain (loss) on open futures contracts		1,202,346			(156,581)		1,045,765
				.
Interest rates contracts	Net Unrealized gain (loss) on open futures contracts		480,661			(820,436)		(339,775)

Meats contracts	Net Unrealized gain (loss) on open futures contracts		37,013			(5,967)		31,046

Metals contracts	Net Unrealized gain (loss) on open futures contracts		1,464,763			(828,583)		636,180

Soft commodities contracts	Net Unrealized gain (loss) on open futures contracts		371,081			(161,787)		209,294

Stock indices contracts	Net Unrealized gain (loss) on open futures contracts		867,587			(349,210)		518,377

		$	5,223,195		$	(2,578,536)	$	2,644,659

Forward currency contracts	Net Unrealized gain (loss) on open forward currency contracts	$	573,423		$	(547,796)	$	25,627

Swap Contracts*	Net Unrealized gain (loss) on open swap contracts	$	1,179,312		$	—	$	1,179,312

*At December 31, 2017, the sector exposure of the CTA indices underlying the swaps was:

Deutsche Bank total return swap, termination date March 29, 2019
Agricultural contracts	3%
Energy contracts	3%
Interest rate contracts	54%
Metals contracts	4%
Stock indices contracts	16%
Forward currency contracts	20%
Total	100%

Deutsche Bank total return swap, termination date July 1, 2020
Interest rate contracts	44%
Stock indices contracts	14%
Forward currency contracts	42%
Total	100%

The Effect of Derivative Instruments on the Consolidated Statement of Operations for the Three Months Ended March 31, 2018 and 2017


		Three Months Ended		Three Months Ended
Type of Contract		March 31, 2018		March 31, 2017

Agriculturals contracts	Net gain (loss) from futures trading	$	(736,354)	$	(646,957)
Currencies contracts	Net gain (loss) from futures trading		112,083		(1,578,888)
Energy contracts	Net gain (loss) from futures trading		(437,551)		(3,111,188)
Interest rates contracts	Net gain (loss) from futures trading		457,206		(3,155,183)
Meats contracts	Net gain (loss) from futures trading		(108,284)		(7,808)
Metals contracts	Net gain (loss) from futures trading		(899,375)		55,883
Soft commodities contracts	Net gain (loss) from futures trading		657,094		377,913
Stock indices	Net gain (loss) from futures trading		(2,966,998)		9,078,242
Forward Currency Contracts	Net gain (loss) from forward trading		79,074		(545,656)
Swap Contracts	Net gain (loss) from swap trading		294,820		454,233

		$	(3,548,285)	$	920,591


Line Item in Consolidated Statement of Operations	Three Months Ended
	March 31, 2018		March 31, 2017

Net gain (loss) from futures trading
Realized	$	(1,918,046)	$	2,661,434
Change in unrealized		(2,004,133)		(1,649,420)
Total realized and change in unrealized net gain (loss) from futures trading	$	(3,922,179)	$	1,012,014

Net gain (loss) from forward trading
Realized	$	(44,397)	$	(67,154)
Change in unrealized		123,471		(478,502)
Total realized and change in unrealized net gain (loss) from forward trading	$	79,074	$	(545,656)

Net gain (loss) from swap trading
Change in unrealized	$	294,820	$	454,233
Total realized and change in unrealized net gain (loss) from swap trading	$	294,820	$	454,233

Total realized and change in unrealized net gain (loss) from futures, forward and swap trading	$	(3,548,285)	$	920,591

The tables below show the gross amounts of recognized derivative assets and gross amounts offset in the accompanying Consolidated Statements of Financial Condition:

Offsetting of Derivative Assets

As of March 31, 2018


					Net Amount of
			Gross Amounts		Unrealized Gain
			Offset in the		Presented in
	Gross Amount of		Consolidated		the Consolidated
	Recognized		Statement of		Statement of
Type of Instrument	Assets		Financial Condition		Financial Condition

U.S. and foreign futures contracts	$	3,172,216	$	(2,531,690)	$	640,526
Forward contracts		397,363		(248,265)		149,098
Swap contracts		2,113,139		(639,007)		1,474,132
Total derivatives	$	5,682,718	$	(3,418,962)	$	2,263,756

Offsetting of Derivative Liabilities

As of March 31, 2018


					Net Amount of
			Gross Amounts		Unrealized Gain
			Offset in the		Presented in
	Gross Amount of		Consolidated		the Consolidated
	Recognized		Statement of		Statement of
Type of Instrument	Liabilities		Financial Condition		Financial Condition

U.S. and foreign futures contracts	$	2,531,690	$	(2,531,690)	$	—
Forward contracts		248,265		(248,265)		—
Swap contracts		639,007		(639,007)		—
Total derivatives	$	3,418,962	$	(3,418,962)	$	—

Derivatives Assets and Liabilities and Collateral Received by Counterparty

As of March 31, 2018


			Gross Amounts Not Offset in the Consolidated
			Statement of Financial Condition
	Net Amount of
	Unrealized Gain
	Presented in
	the Consolidated
	Statement of		Financial		Cash Collateral
Counterparty	Financial Condition		Instruments		Received		Net Amount

Deutsche Bank AG	$	1,474,132	$	—	$	—	$	1,474,132
SG Americas Securities, LLC		715,080		—		—		715,080
UBS AG		4,009		—		—		4,009
Wells Fargo Securities, LLC		70,535		—		—		70,535
Total	$	2,263,756	$	—	$	—	$	2,263,756

Offsetting of Derivative Assets

As of December 31, 2017


					Net Amount of
			Gross Amounts		Unrealized Gain
			Offset in the		Presented in
	Gross Amount of		Consolidated		the Consolidated
	Recognized		Statement of		Statement of
Type of Instrument	Assets		Financial Condition		Financial Condition

U.S. and foreign futures contracts	$	5,223,195	$	(2,578,536)	$	2,644,659
Forward contracts		573,423		(547,796)		25,627
Swap contracts		1,179,312		—		1,179,312
Total derivatives	$	6,975,930	$	(3,126,332)	$	3,849,598

Offsetting of Derivative Liabilities

As of December 31, 2017


					Net Amount of
			Gross Amounts		Unrealized Gain
			Offset in the		Presented in
	Gross Amount of		Consolidated		the Consolidated
	Recognized		Statement of		Statement of
Type of Instrument	Liabilities		Financial Condition		Financial Condition

U.S. and foreign futures contracts	$	2,578,536	$	(2,578,536)	$	—
Forward contracts		547,796		(547,796)		—
Swap contracts		—		—		—
Total derivatives	$	3,126,332	$	(3,126,332)	$	—

Derivatives Assets and Liabilities and Collateral Received by Counterparty

As of December 31, 2017


			Gross Amounts Not Offset in the Consolidated
			Statement of Financial Condition
	Net Amount of
	Unrealized Gain
	Presented in
	the Consolidated
	Statement of		Financial		Cash Collateral
Counterparty	Financial Condition		Instruments		Received		Net Amount

Deutsche Bank AG	$	1,179,312	$	—	$	—	$	1,179,312
SG Americas Securities, LLC		1,805,261		—		—		1,805,261
UBS AG		(60,011)		—		—		(60,011)
Wells Fargo Securities, LLC		925,036		—		—		925,036
Total	$	3,849,598	$	—	$	—	$	3,849,598

Note 11. Derivative Instruments

In addition to market risk, in entering into commodity interest contracts there is a credit risk that a counter party will not be able to meet its obligations to the Partnership. In general, clearing organizations are backed by the corporate members of the clearing organization who are required to share any financial burden resulting from the non-performance by one of their members and, as such, should significantly reduce this credit risk. In cases in which the clearing organization is not backed by the clearing members, like some non-U.S. exchanges, it is normally backed by a consortium of banks or other financial institutions.

The Partnership does not designate any derivative instruments as hedging instruments under FASB ASC 815-10-05.

For the year ended December 31, 2017, the monthly average number of futures contracts bought and sold was 38,106 and the monthly average number of forward contracts bought and sold was 585. For the year ended December 31, 2016, the monthly average number of futures contracts bought and sold was 50,266 and the monthly average number of forward contracts bought and sold was 518. The following tables summarize the quantitative information required by FASB ASC 815:


	Consolidated	Asset			Liability
	Statements of Financial	Derivatives			Derivatives
	Condition Location	12/31/2017			12/31/2017		Fair Value

Agricultural contracts	Net Unrealized gain (loss) on open futures contracts	$	192,152		$	(41,963)	$	150,189

Currencies contracts	Net Unrealized gain (loss) on open futures contracts		607,592			(214,009)		393,583

Energy contracts	Net Unrealized gain (loss) on open futures contracts		1,202,346			(156,581)		1,045,765
				.
Interest rates contracts	Net Unrealized gain (loss) on open futures contracts		480,661			(820,436)		(339,775)

Meats contracts	Net Unrealized gain (loss) on open futures contracts		37,013			(5,967)		31,046

Metals contracts	Net Unrealized gain (loss) on open futures contracts		1,464,763			(828,583)		636,180

Soft commodities contracts	Net Unrealized gain (loss) on open futures contracts		371,081			(161,787)		209,294

Stock indices contracts	Net Unrealized gain (loss) on open futures contracts		867,587			(349,210)		518,377

		$	5,223,195		$	(2,578,536)	$	2,644,659

Forward currency contracts	Net Unrealized gain (loss) on open forward currency contracts	$	573,423		$	(547,796)	$	25,627

Swap Contracts*	Net Unrealized gain (loss) on open swap contracts	$	1,179,312		$	—	$	1,179,312

*At December 31, 2017, the sector exposure of the CTA indices underlying the swaps was:

Deutsche Bank total return swap, termination date March 29, 2019
Agricultural contracts	3%
Energy contracts	3%
Interest rate contracts	54%
Metals contracts	4%
Stock indices contracts	16%
Forward currency contracts	20%
Total	100%

Deutsche Bank total return swap, termination date July 1, 2020
Interest rate contracts	44%
Stock indices contracts	14%
Forward currency contracts	42%
Total	100%


	Consolidated	Asset			Liability
	Statements of Financial	Derivatives			Derivatives
	Condition Location	12/31/2016			12/31/2016		Fair Value

Agricultural contracts	Net Unrealized gain (loss) on open futures contracts	$	121,013		$	(261,721)	$	(140,708)

Currencies contracts	Net Unrealized gain (loss) on open futures contracts		763,565			(345,781)		417,784

Energy contracts	Net Unrealized gain (loss) on open futures contracts		562,341			(18,461)		543,880
				.
Interest rates contracts	Net Unrealized gain (loss) on open futures contracts		578,244			(326,726)		251,518

Meats contracts	Net Unrealized gain (loss) on open futures contracts		79,821			(10,487)		69,334

Metals contracts	Net Unrealized gain (loss) on open futures contracts		1,604,965			(1,282,731)		322,234

Soft commodities contracts	Net Unrealized gain (loss) on open futures contracts		344,652			(86,579)		258,073

Stock indices contracts	Net Unrealized gain (loss) on open futures contracts		1,111,526			(553,717)		557,809

		$	5,166,127		$	(2,886,203)	$	2,279,924

Forward currency contracts	Net Unrealized gain (loss) on open forward currency contracts	$	556,627		$	(555,922)	$	705

Swap Contracts*	Net Unrealized gain (loss) on open swap contracts	$	404,566		$	(1,139,264)	$	(734,698)

*At December 31, 2016, the sector exposure of the CTA indices underlying the swaps was:

Deutsche Bank total return swap, termination date March 29, 2019
Agricultural contracts	3%
Energy contracts	1%
Interest rate contracts	53%
Metals contracts	3%
Stock indices contracts	15%
Forward currency contracts	25%
Total	100%

Deutsche Bank total return swap, termination date July 1, 2020
Interest rate contracts	61%
Stock indices contracts	10%
Forward currency contracts	29%
Total	100%

The Effect of Derivative Instruments on the Consolidated Statement of Operations for the Years Ended December 31, 2017, 2016 and 2015


		Years Ended December 31,
Type of Contract		2017		2016		2015

Agriculturals contracts	Net gain (loss) from futures trading	$	(2,343,148)	$	1,009,750	$	(5,823,922)
Currencies contracts	Net gain (loss) from futures trading		(3,320,635)		(2,202,100)		(1,033,607)
Energy contracts	Net gain (loss) from futures trading		(4,612,712)		(4,239,891)		7,578,021
Interest rates contracts	Net gain (loss) from futures trading		(8,492,797)		19,692,367		(546,752)
Meats contracts	Net gain (loss) from futures trading		266,929		(161,655)		40,851
Metals contracts	Net gain (loss) from futures trading		(1,954,292)		(2,242,748)		(493,305)
Soft commodities contracts	Net gain (loss) from futures trading		220,619		(785,394)		(1,501,617)
Stock indices	Net gain (loss) from futures trading		23,817,809		4,103,539		(10,362,726)
Forward Currency Contracts	Net gain (loss) from forward trading		(2,371,940)		325,950		(2,077,514)
Swap Contracts	Net gain (loss) from swap trading		1,914,010		(1,902,797)		1,168,100

		$	3,123,843	$	13,597,021	$	(13,052,471)


Line Item in Consolidated Statement of Operations	For years ended December 31,
	2017		2016		2015

Net gain (loss) from futures trading
Realized	$	3,217,037	$	13,721,540	$	(1,421,184)
Change in unrealized		364,735		1,452,328		(10,721,873)
Total realized and change in unrealized net gain (loss) from futures trading	$	3,581,772	$	15,173,868	$	(12,143,057)

Net gain (loss) from forward trading
Realized	$	(2,396,861)	$	84,586	$	(2,018,078)
Change in unrealized		24,922		241,364		(59,436)
Total realized and change in unrealized net gain (loss) from forward trading	$	(2,371,939)	$	325,950	$	(2,077,514)

Net gain (loss) from swap trading
Change in unrealized	$	1,914,010		(1,902,797)		1,168,100
Total realized and change in unrealized net gain (loss) from swap trading	$	1,914,010	$	(1,902,797)	$	1,168,100

Total realized and change in unrealized net gain (loss) from futures, forward and swap trading	$	3,123,843	$	13,597,021	$	(13,052,471)

The tables below show the gross and net information related to derivatives eligible for offset in the Consolidated Statement of Financial Condition as of December 31, 2017 and 2016.

Offsetting of Derivative Assets

As of December 31, 2017


					Net Amount of
			Gross Amounts		Unrealized Gain
			Offset in the		Presented in
	Gross Amount of		Consolidated		the Consolidated
	Recognized		Statement of		Statement of
Type of Instrument	Assets		Financial Condition		Financial Condition

U.S. and foreign futures contracts	$	5,223,195	$	(2,578,536)	$	2,644,659
Forward contracts		573,423		(547,796)		25,627
Swap contracts		1,179,312		—		1,179,312
Total derivatives	$	6,975,930	$	(3,126,332)	$	3,849,598

Offsetting of Derivative Liabilities

As of December 31, 2017


					Net Amount of
			Gross Amounts		Unrealized Gain
			Offset in the		Presented in
	Gross Amount of		Consolidated		the Consolidated
	Recognized		Statement of		Statement of
Type of Instrument	Liabilities		Financial Condition		Financial Condition

U.S. and foreign futures contracts	$	2,578,536	$	(2,578,536)	$	—
Forward contracts		547,796		(547,796)		—
Swap contracts		—		—		—
Total derivatives	$	3,126,332	$	(3,126,332)	$	—

Derivatives Assets and Liabilities and Collateral Received by Counterparty

As of December 31, 2017


			Gross Amounts Not Offset in the Consolidated
			Statement of Financial Condition
	Net Amount of
	Unrealized Gain
	Presented in
	the Consolidated
	Statement of		Financial		Cash Collateral
Counterparty	Financial Condition		Instruments		Received		Net Amount

Deutsche Bank AG	$	1,179,312	$	—	$	—	$	1,179,312
SG Americas Securities, LLC		1,805,261		—		—		1,805,261
UBS AG		(60,011)		—		—		(60,011)
Wells Fargo Securities, LLC		925,036		—		—		925,036
Total	$	3,849,598	$	—	$	—	$	3,849,598

Offsetting of Derivative Assets

As of December 31, 2016


					Net Amount of
			Gross Amounts		Unrealized Gain
			Offset in the		Presented in
	Gross Amount of		Consolidated		the Consolidated
	Recognized		Statement of		Statement of
Type of Instrument	Assets		Financial Condition		Financial Condition

U.S. and foreign futures contracts	$	5,166,127	$	(2,886,203)	$	2,279,924
Forward contracts		556,627		(555,922)		705
Swap contracts		404,566		(1,139,264)		(734,698)
Total derivatives	$	6,127,320	$	(4,581,389)	$	1,545,931

Offsetting of Derivative Liabilities

As of December 31, 2016


					Net Amount of
			Gross Amounts		Unrealized Gain
			Offset in the		Presented in
	Gross Amount of		Consolidated		the Consolidated
	Recognized		Statement of		Statement of
Type of Instrument	Liabilities		Financial Condition		Financial Condition

U.S. and foreign futures contracts	$	2,886,203	$	(2,886,203)	$	—
Forward contracts		555,922		(555,922)		—
Swap contracts		1,139,264		(1,139,264)		—
Total derivatives	$	4,581,389	$	(4,581,389)	$	—

Derivatives Assets and Liabilities and Collateral Received by Counterparty

As of December 31, 2016


			Gross Amounts Not Offset in the Consolidated
			Statement of Financial Condition
	Net Amount of
	Unrealized Gain
	Presented in
	the Consolidated
	Statement of		Financial		Cash Collateral
Counterparty	Financial Condition		Instruments		Received		Net Amount

Deutsche Bank AG	$	(734,698)	$	—	$	—	$	(734,698)
SG Americas Securities, LLC		1,582,067		—		—		1,582,067
UBS AG		(40,113)		—		—		(40,113)
Wells Fargo Securities, LLC		738,675		—		—		738,675
Total	$	1,545,931	$	—	$	—	$	1,545,931