Do owners and charterers speculate?
Again – we don’t know why people put their trades on. We might see an owner buying forward space – which is the opposite of hedging. This is also called a Texas Hedge. The owner, in addition to already owning ships, is taking an additional long position. But with this said – we don’t know why. He might be covering a short position he took earlier (i.e. unwinding his hedge). With the sub-prime crisis still fresh in our minds – and with the Nick Leeson and Long Term Capital debacles not too distant in our rear view mirror – don’t people view the FFA market as a form of gambling? We get that comment on occasion, but – when used properly, forward freight agreements are actually the opposite of gambling. Owning 20 ships in the spot market could be considered gambling. If the market goes up, you win. If it goes down, you lose. With FFAs you can reduce your exposure to the spot market if you feel it is too great. From the charterer’s perspective, having 50 cargos to move in a year could be co
