Derivative Instruments

9 Months Ended

Sep. 30, 2022

Derivative Instruments

Derivative Instruments

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%.

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

For the three and nine months ended September 30, 2022, the monthly average number of futures contracts bought and sold was 3,933 and 3,786, respectively, and there were no forward contracts bought or sold. For the three and nine months ended September 30, 2021, the monthly average number of futures contracts bought and sold was 5,307 and 5,177, respectively, and the monthly average number of forward contracts bought and sold was 0 and 78, respectively. There were no swap contracts bought or sold during the three months ended September 30, 2022 and 2021 and there was one swap contract terminated during the nine months ended September 30, 2022 and no swap contracts were bought or sold during the nine months ended September 30, 2021. The following tables summarize the quantitative information required by FASB ASC 815:

Fair Values of Derivative Instruments at September 30, 2022 and December 31, 2021

	Consolidated	Asset		Liability
	Statements of Financial	Derivatives		Derivatives
Type of Contract	Condition Location	September 30, 2022		September 30, 2022		Fair Value
Agriculturals contracts	Net Unrealized gain (loss) on open futures contracts	$	48,908	$	(195,926)	$	(147,018)
Currencies contracts	Net Unrealized gain (loss) on open futures contracts		388,872		(63,136)		325,736
Energy contracts	Net Unrealized gain (loss) on open futures contracts		87,763		(229,901)		(142,138)
Interest rates contracts	Net Unrealized gain (loss) on open futures contracts		1,623,762		(518,534)		1,105,228
Meats contracts	Net Unrealized gain (loss) on open futures contracts		23,277		(28,745)		(5,468)
Metals contracts	Net Unrealized gain (loss) on open futures contracts		416,876		(148,297)		268,579
Soft commodities contracts	Net Unrealized gain (loss) on open futures contracts		70,057		(35,881)		34,176
Stock indices contracts	Net Unrealized gain (loss) on open futures contracts		722,864		(206,427)		516,437
Total		$	3,382,379	$	(1,426,847)	$	1,955,532

	Consolidated	Asset		Liability
	Statements of Financial	Derivatives		Derivatives
Type of Contract	Condition Location	December 31, 2021		December 31, 2021		Fair Value
Agriculturals contracts	Net Unrealized gain (loss) on open futures contracts	$	78,449	$	(92,756)	$	(14,307)
Currencies contracts	Net Unrealized gain (loss) on open futures contracts		82,177		(235,432)		(153,255)
Energy contracts	Net Unrealized gain (loss) on open futures contracts		51,769		(40,364)		11,405
Interest rates contracts	Net Unrealized gain (loss) on open futures contracts		347,549		(167,687)		179,862
Meats contracts	Net Unrealized gain (loss) on open futures contracts		12,651		(4,114)		8,537
Metals contracts	Net Unrealized gain (loss) on open futures contracts		228,905		(189,619)		39,286
Soft commodities contracts	Net Unrealized gain (loss) on open futures contracts		101,421		(24,286)		77,135
Stock indices contracts	Net Unrealized gain (loss) on open futures contracts		174,098		(98,809)		75,289
Total		$	1,077,019	$	(853,067)	$	223,952
Swap contracts*	Net Unrealized gain (loss) on open swap contracts	$	—	$	(591,631)	$	(591,631)
*At December 31, 2021, the sector exposure of the CTA index underlying the swap was:
Deutsche Bank total return swap, termination date June 30, 2025
Interest rate contracts	26%
Stock indices contracts	23%
Forward currency contracts	51%
Total	100%

The Effect of Derivative Instruments on the Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2022 and 2021

		Three Months Ended				Nine Months Ended
Type of Contract	Line Item in Consolidated Statements of Operations	September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021
Agriculturals contracts	Net gain (loss) from futures trading	$	(225,448)	$	(84,408)	$	23,679	$	1,104,559
Currencies contracts	Net gain (loss) from futures trading		770,724		(34,545)		1,773,677		(144,127)
Energy contracts	Net gain (loss) from futures trading		(1,016,192)		1,018,009		956,123		2,871,594
Interest rates contracts	Net gain (loss) from futures trading		1,389,825		(437,453)		3,220,959		(71,413)
Meats contracts	Net gain (loss) from futures trading		(172,136)		(25,949)		(383,906)		2,754
Metals contracts	Net gain (loss) from futures trading		461,563		(162,436)		1,459,350		51,631
Soft commodities contracts	Net gain (loss) from futures trading		(374,607)		814,972		(574,551)		1,523,216
Stock indices contracts	Net gain (loss) from futures trading		438,825		95,342		635,138		920,276
Total	Net gain (loss) from futures trading		1,272,554		1,183,532		7,110,469		6,258,490
Forward currency contracts	Net gain (loss) from forward currency trading		—		—		—		86,650
Swap contracts	Net gain (loss) from swap trading		—		127,553		(330,498)		971,129
Total		$	1,272,554	$	1,311,085	$	6,779,971	$	7,316,269

Line Item in Consolidated Statements of Operations	Three Months Ended				Nine Months Ended
	September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021
Net gain (loss) from futures trading
Realized	$	(224,760)	$	(441,547)	$	5,378,889	$	6,081,699
Change in unrealized		1,497,314		1,625,079		1,731,580		176,791
Total realized and change in unrealized net gain (loss) from futures trading	$	1,272,554	$	1,183,532	$	7,110,469	$	6,258,490
Net gain (loss) from forward currency trading
Realized	$	—	$	—	$	—	$	22,721
Change in unrealized		—		—		—		63,929
Total realized and change in unrealized net gain (loss) from forward currency trading	$	—	$	—	$	—	$	86,650
Net gain (loss) from swap trading
Realized	$	—	$	—	$	(922,129)	$	—
Change in unrealized		—		127,553		591,631		971,129
Total realized and change in unrealized net gain (loss) from swap trading	$	—	$	127,553	$	(330,498)	$	971,129
Total realized and change in unrealized net gain (loss) from futures, forward currency and swap trading	$	1,272,554	$	1,311,085	$	6,779,971	$	7,316,269

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 September 30, 2022

					Net Amount of
			Gross Amounts		Unrealized Gain/(Loss)
			Offset in the		Presented in
	Gross Amount of		Consolidated		the Consolidated
	Recognized		Statements of		Statements of
Type of Instrument	Assets		Financial Condition		Financial Condition
Total U.S. and foreign futures contracts	$	3,382,379	$	(1,426,847)	$	1,955,532

Offsetting of Derivative Liabilities

As of September 30, 2022

					Net Amount of
			Gross Amounts		Unrealized Gain
			Offset in the		Presented in
	Gross Amount of		Consolidated		the Consolidated
	Recognized		Statements of		Statements of
Type of Instrument	Liabilities		Financial Condition		Financial Condition
Total U.S. and foreign futures contracts	$	1,426,847	$	(1,426,847)	$	—

Derivative Assets and Liabilities and Collateral Received by Counterparty

As of September 30, 2022

			Gross Amounts Not Offset in the Consolidated
			Statements of Financial Condition
	Net Amount of
	Unrealized Gain/(Loss)
	Presented in
	the Consolidated
	Statements of		Financial		Cash Collateral
Counterparty	Financial Condition		Instruments		Pledged		Net Amount
ADM Investor Services, Inc.	$	68,926	$	—	$	—	$	68,926
Rosenthal Collins Group Division of Marex Spectron		1,886,606		—		—		1,886,606
Total	$	1,955,532	$	—	$	—	$	1,955,532

Offsetting of Derivative Assets

As of December 31, 2021

					Net Amount of
			Gross Amounts		Unrealized Gain/(Loss)
			Offset in the		Presented in
	Gross Amount of		Consolidated		the Consolidated
	Recognized		Statements of		Statements of
Type of Instrument	Assets		Financial Condition		Financial Condition
U.S. and foreign futures contracts	$	1,077,019	$	(853,067)	$	223,952
Swap contracts		—		(591,631)		(591,631)
Total derivatives	$	1,077,019	$	(1,444,698)	$	(367,679)

Offsetting of Derivative Liabilities

As of December 31, 2021

					Net Amount of
			Gross Amounts		Unrealized Gain
			Offset in the		Presented in
	Gross Amount of		Consolidated		the Consolidated
	Recognized		Statements of		Statements of
Type of Instrument	Liabilities		Financial Condition		Financial Condition
U.S. and foreign futures contracts	$	853,067	$	(853,067)	$	—
Swap contracts		591,631		(591,631)		—
Total derivatives	$	1,444,698	$	(1,444,698)	$	—

Derivative Assets and Liabilities and Collateral Received by Counterparty

As of December 31, 2021

			Gross Amounts Not Offset in the Consolidated
			Statements of Financial Condition
	Net Amount of
	Unrealized Gain/(Loss)
	Presented in
	the Consolidated
	Statements of		Financial		Cash Collateral
Counterparty	Financial Condition		Instruments		Pledged		Net Amount
ADM Investor Services, Inc.	$	120,272	$	—	$	—	$	120,272
Deutsche Bank AG		(591,631)		—		591,631		—
Rosenthal Collins Group Division of Marex Spectron		103,680		—		—		103,680
Total	$	(367,679)	$	—	$	591,631	$	223,952