Forward Freight Agreements (FFAs) are commodity derivatives which derive from the underlying physical shipping markets. In a volatile market, FFAs give companies the ability to manage their freight risk. They also provide a mechanism for companies to take on price risk through an exposure to global trade and are an important element of the shipping markets.
Freight derivatives were first traded by dry bulk shipping companies in the mid-1980s. Today they are widely used in the dry bulk and tanker sectors. New contracts have been recently introduced for LNG and LPG shipping.
Futures and options:
FFA are either traded as futures or options across different expiries on the forward curve starting from the first month and up to six calendar years.
Freight Futures are financial contracts with standardised features such as specific expiry dates, cleared on a regulated financial exchanged and with standardised lot sizes – normally one day or 1000 mt is the minimum trade clip.
Freight Options have the same standardised features of futures such as expiries and lot size, but are traded as either calls or puts.
FFAs are cleared with our exchange partners and their respective clearing members. This reduces counterparty risk and automates netting of long and short positions.
To learn more about our exchange partners and clearing members click here.
Learn more about using FFAs:
Gain a full understanding of FFAs by attending a Baltic Academy training course. These take place throughout the year and are held in London, Houston and Singapore.
Further details of all Baltic Academy Courses can be found here.