Create a Spread Contract

This activity describes creating a spread contract via the Hedging Explorer. Most steps are also applicable when creating spread contracts in other screens, such as a Despatch Order or Commodity Exposure report.

This activity presumes that a market commodity with the Spread contract type exists. See Commodities, Markets and Market Commodities.

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

Open the Hedging Explorer.
Select the Hedge Actions tab.
Right-click in the Hedge Actions field group and select New » Related Actions from the menu.
The menu displays applicable market commodities, each with its associated market.
Select the market commodity for which to create the hedge position.
The New Hedge Action screen displays.
Update the Hedge Date if required. If creating a hedge position for a despatch order QP override, the default date is the spot pricing date. Otherwise, the default date is the first day of the current month.
Update the Transaction Type for each leg if required. Whether the hedge position is being bought or sold in the marketplace. Select from Buy and Sell. Default for the first leg: as specified for the market commodity. Default for the second leg: the opposite transaction type. Changing the transaction type of one leg will also change the other leg.
Update the Maturity Date for each leg if required. The Maturity Date Scope in the market commodity configuration determines whether a day can be entered for the date, or just a month and year. If only a month and year is entered, the maturity date is the last business day of the month. For spread contracts, the maturity dates for the Buy and Sell legs will be different. By default:
- If a day can be entered, the maturity date of the first leg is the third Wednesday of the current month, or if that date is already past, the third Wednesday of the next month. The maturity date of the second leg is the third Wednesday of the month after the maturity date of the first leg.
- If only a month and year can be entered, the maturity date of the first leg is the current month, and the maturity date of the second leg is the next month.
Enter the Strike Price for both legs, or enter the strike price for the first leg and the Spread. If both strike prices are entered, MineMarket calculates the Spread. Alternatively, if the first price and the spread are entered, MineMarket calculates the second price. The strike price is the settlement Exercise Price for spread contracts. If hedging a quotation pricing (QP) override in a despatch order, the default price is the price value of the QP. Fixed price charges are not included.
Select an Owner Organisation. Select from the organisations and companies defined on the Organisations panel of the Solution Explorer. Default for hedge positions with a despatch order or quota allocation: the buyer of the sales contract or the seller of the purchase contract.
Select a District. Select from the districts defined on the Organisations panel of the Solution Explorer. Default for hedge positions with a despatch order or quota allocation: the district of the sales or purchase contract.
Select an Action Classification if required. Select from the Hedge Action Classification list items defined in the List Editor. Default: As specified for the market commodity.
Select a Broker if required. Select from the organisations and companies defined on the Organisations panel of the Solution Explorer and that have the Organisation Role of Brokers. Default: As specified for the market commodity.
Enter the Number Of Contracts as a whole number.
MineMarket calculates the Quantity as the Number Of Contracts multiplied by the Market Contract Quantity of the market commodity.
In the Hedge Actions table, Number Of Contracts and Quantity display as positive numbers for spread contracts with the Transaction Type set to Buy; and negative for Sell.
Click Create.
The New Hedge Action screen closes.
A message displays the status of the hedge position creation.
Click OK.
Update the pricing if required.
For a spread contract, a double row displays in the Hedge Actions table. Each row is for one leg of the spread contract. Like for a futures contract, each row must describe two prices: one that will be the settlement Exercise Price, and one that will be the settlement Market Price.
1. For the exercise price configuration, update the following fields.
2. For the market price configuration, update the Price Series. The market price is the price in the price series at the maturity date. Select from the price series defined in the Pricing Editor that have a matching Material Type, Product or Analyte Definition defined for the commodity. For foreign exchange (FX) hedge positions, an exchange rate series is used instead of a price series. Default: As specified for the market commodity.
Complete the remaining fields as required.
- Name
- Broker Reference—External reference name or number of the hedge position, as stored in the broker's system.
- Broker Fee—Amount charged by the broker, in the nominated currency. The fee is considered to be a flat fee for the whole hedge position. The broker fee is included in valuations and the settlement for the hedge position. For options contracts, the broker fee is paid even if the options contract is withdrawn.
- Broker Fee Currency—Select from the currencies defined in the Currency/Exchange Editor.
- Accounting Group—Select from the accounting groups defined on the Chart Of Accounts screen.
Click Save.