FFAs are something that we all think are clear as mud, so we read with appreciation Moore Stephens' definition of classic or alternative accountancy terms, as found in its newsletter Bottom Line. The textbook definition of FFAs is that they "provide a means of hedging exposure to freight market risk through trading of specified time charter and voyage rates for forward positions".
The alternative definition is that they are: "a form of gambling, like insurance". The idea that they provide owners and charterers with a measure of protection against the inherent volatility of freight rates is poppycock, according to the accountants.
We read that "In a typical FFA trade, the seller bets that the market rate on a given day will be lower than the contract rate, and the buyer bets that it won't be. Whoever loses is obliged to pay the difference between the two rates multiplied by the number of days in Lent divided by the distance from the earth to the sun. (In the event of a tie, a game of conkers will decide.) The award to the loser under such a contract is called Sweet FA."
We have to remind readers that games of conkers are now politically incorrect and could result in undue attention from insurers.
FFAs are grouped under the generic heading of "derivatives", which also includes swaps. Most of these, especially all of them, are derived from the practice of swapping cigarette cards featuring footballers. As a rule of thumb, one Jimmy Greaves is worth two Johnny Haynes, we are informed.
So now you know, and that does not include information on sleeving.