Create a Hedge Position and Allocation for a Quota QP

This activity creates a hedge position for a physical commodity and allocates the quota-level quotation pricing (QP) line to the hedge position.

QP lines specified within contract-level contract terms cannot be hedged.

Typically, contracts with analyte pricing are only hedged by despatch order, rather than by quota. This is because the calculation of the payable analyte quantity is done by despatch order (based on transactions and sample results).

In order to be hedged, the quota QP line must:

  • Be within a contract with product pricing
  • Be within an override set of contract terms for a quota that has Hedging Required checked
  • Have the Weighting Type set to Quantity and the Weighting Reference set to Quota Quantity in the QP header
  • Have the Weighting Value specified

Security Note: You need the Allow the user to maintain hedge actions security right in the Accounting user group security rights group for this activity.

Activity Steps

  1. Open the Sales Contract or Purchase Contract.
  2. Expand the Contract Products » [Contract Product] » Quotas » [Quota] » Contract Term Overrides node.
  3. Select the Quotation Pricing node.
  4. Perform one of the following steps:
    1. To create a futures contract or an options contract, right-click the quotation pricing line in the Quotation Pricing table and select Hedge » Hedge Action from the menu.
    2. To create a spread contract or a swaps contract, right-click the quotation pricing line in the Quotation Pricing table and select Hedge » Related Actions from the menu.

    The menu displays applicable market commodities, each with its associated market.

  5. Select the market commodity for which to create the hedge position.

    The New Hedge Action screen displays.

    Note: The Contract Type, Option Type (if applicable) and Transaction Type are as specified for the market commodity.
    The Owner Organisation and District are inherited from the sales or purchase contract.
    The Number Of Contracts defaults to a value that is sufficient for the Quantity of the hedge position to be greater than the Allocated Quantity from the quota QP line. Keeping this default means that the quota QP line is overhedged.

  6. As applicable for the hedge position's contract type, see the following activities for further steps:

    Note: Some steps can only be completed on the Hedge Actions tab of the Hedging Explorer after searching for the hedge position. Additional despatch orders or quotas can be allocated to the hedge position if there is sufficient unallocated quantity in the hedge position.