The settlement price (7 days average) was finally USD 8,500/day, which is why the FFA seller (owner) pays the difference to the FFA buyer (charterer) for 50 days ($500 per day – $50-$25,000). Indeed, no party loses money, since the charterer takes back the $500 paid to the owner in the physical market, while the owner pays nothing out of his own pocket, since the $25,000 is part of the total freight he earned (since he earned 8,500/day on the physical market). The instruments are billed using various freight price indices published by the Baltic Exchange and the Shanghai Shipping Exchange. On the other hand, compensation contracts are awarded daily through the clearing house provided for this purpose. At the end of each day, investors receive or owe the difference between the price of paper contracts and the market index. Clearing services are provided by leading exchanges such as nasdaQ OMX Commodities, the European Energy Exchange and the Chicago Mercantile Exchange (CME), to name a few. FFAs, the most common freight derivative, are traded under the terms and conditions of the Forward Freight Agreement Broker Association (FFABA). The main terms of an agreement include the agreed itinerary, the date of the billing, the size of the contract and the rate at which the differences are compensated. Options are the most advanced derivatives that are increasingly being used in shipping lately.
This happens because, as we will see later, they offer even more flexibility than common FFA. Unlike futures and futures contracts that impose a bargaining obligation on counterparties, the option allows the buyer to decide whether to do the same and then negotiate. However, the seller of the option has no choice if the buyer chooses to do the same. Options are also traded on both the stock markets and the CTA. There are two types of options. Call options and selling options. Call options give someone the right to buy an asset at a certain price, while put options give someone the right to sell an asset. For the purchase of an option, you pay the premium, whereas the buyer does not need to write a margin, because he has the opportunity to exercise the same thing and therefore poses no risk to his counterparty.
On the other hand, a margin must be made by the seller as collateral. There are four main strategies that are often used in options trading: to comply with the carrier`s obligation imposed by « Iarovaia anti-terrorism legislation » to verify the description of the cargo, PJSC TransContainer has the right to carry out such an audit. In this case, we designed a mobile application for photographic evidence for loaded loading; Responsibility for the corruption of the description of the cargo is established. We also encounter swaps, but also in other sectors of the maritime industry (finance, accounting) to manage the risk associated with interest rate fluctuations (interest rate swaps). Derivatives are used for hedging, in which Hedger enters into a futures/advance contract contrary to its position in the physical market, in order to counteract changes in the value of the spot position by offsetting changes in the value of the derivative.