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Nasma Freight Service, Qatar

What is a freight derivative?

A freight derivative is a financial contract between two parties, which sets an agreed future price for carrying commodities at sea. The contract does not involve any actual freight or any actual ships. It is purely a financial agreement - much like that found in other commodity futures markets. At Imarex you can trade Freight Futures, Freight Options and OTC Freight Forwards (FFAs)

Are freight derivatives similar to financial derivatives?

Shipping markets are large commodity markets and all characteristics for financial derivatives are present. Tanker and Dry bulk chartering both have a significant underlying market size. Both markets experience very high volatility in spot and long term prices. Exceptionally high volatility in the price of freight, means that in the physical underlying markets - which are the world shipping markets, natural buyers (refiners, importers, traders etc) have to take into account a high risk of price movements in freight when calculating the cost of transport. At Imarex, Principals (those trading directly for their own account) trade freight derivatives electronically on screen in real time, or via an Imarex Exchange Broker. All principals trade anonymously, and with the security of "Straight through Clearing".

What is an FFA?

An FFA is a forward freight agreement. It allows ship owners, charterers as well as speculators to buy and sell the price of freight for future dates.