Because new day-dreams can help you get what you want!
If you are like me, you dream of one day owning a big income producing asset. For me, it is a big ship. And if you want to do that, you need to know how to use shipping derivatives.
Or at least what they are all about. So that you can make informed decisions about your ship. Derivative markets for some maritime vessel types are more developed than others. This influences investment decisions because derivatives allow shipowners to hedge against risky movements in freight rates.
OTC's, or Over the Counter agreements, are customized agreements that take into account additional details, such as contract details in terms of freight and initiation, for example. There are different types of of FFA's, or Freight Forward Agreements, that are used in the shipping industry.
FFA's may be based on a given amount of cargo, a certain type of vessel, or trade routes. Like OTC's, forward agreements or contracts typically provide a very customized solution. Now you have to trust me this technical stuff is gonna help you later, so read on!!! 😁
Freight Options are generally agreements that give charterers the future choice to pay a certain amount for freight transport on a specific route and time period. The holder is not obligated to “exercise” the option.
Freight Futures are traded on exchanges such as IMAREX . There are also other tools such as bunker derivatives. They may help shipowners to mitigate risk due to their dependency on oil price. These can all help your dreams come true. Like when you're sitting in the coffee ship and thinking about your ship...😉. You know the feeling...
The most common tools being used in the shipping derivative market are Freight Futures, FFA's, and future options. There are two main uses for these tools. One is for risk mitigation and the other is for speculation and arbitrage.
These terms may seem somewhat mystical. 😀The table below shows what they mean.
Experience has shown that freight futures are a good indication of what freight rates will look like in the future on certain routes. They can therefore be used by shipowners to forecast future revenues in the short term.
I OFTEN POST ABOUT MARITIME SHIPPING, POLITICS, AND LANGUAGES. UPVOTE, RESTEEM, COMMENT, AND/OR FOLLOW ME IF YOU LIKE THIS TYPE OF CONTENT!
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Sources
Kavussanos, M., and Visvikis, I., 2007, Conference notes from the seminar: Shipping
Derivatives and Risk Management, Piraeus, February 2007.
Tzavaras 2007. Interview by e-mail in 2007.
You are the first person I know who is dreaming of owning a ship that is an income producing asset. I don't think you will have a lot of competition in that market? or is there?
Nope no one I am the only one :-)
splandid great my freind i love what you doing for us
Yes! I hope you have a WONDERFUL, WONDERFUL day and thanks for the kind words. Where are you from? 🤠
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