Hedging & Risk Management in Jules
How Jules manages commodity price hedging — from hedging contracts to container-level allocation and position tracking.
Hedging & Risk Management in Jules
Product documentation — How Jules manages commodity price risk through hedging contracts, container-level hedging allocation, and position tracking.
Table of Contents
- Overview
- Hedging Contracts
- Contract Types
- Hedging Markets
- Hedging Lifecycle
- Container-Level Hedging
- Position Tracking & KPIs
- Operation-Level Hedging Status
- Key Business Rules
- Glossary
Overview
In recyclable commodity trading, prices fluctuate based on market conditions (metal prices on LME, paper indices, etc.). Hedging allows traders to lock in prices and reduce exposure to these fluctuations.
Jules provides a complete hedging workflow:
Hedging Contracts
A hedging contract represents a financial instrument used to cover commodity price risk. It is typically a futures or options contract on a commodity exchange.
Key Fields
| Field | Description |
|---|---|
| Harold number | Unique identifier |
| Type | Type of hedging action (see Contract Types) |
| Market | Exchange market (LME, COMEX) |
| Commodity | The hedged commodity (e.g., Copper, Aluminum) |
| Quantity | Volume covered by the contract |
| Trade date | Date the hedging contract was executed |
| Prompt date | Settlement/delivery date on the exchange |
| Buy action price | Price at which a buy hedge was executed |
| Sell action price | Price at which a sell hedge was executed |
| Average period | Date range for averaging (for average price contracts) |
| Commission | Broker commission |
| Broker | The brokerage firm |
Contract Types
Jules supports a rich set of hedging contract types:
Standard Hedges
| Type | Description |
|---|---|
| PURCHASE | Buy hedge — locks in a purchase price |
| SALE | Sell hedge — locks in a selling price |
Average Price Hedges
| Type | Description |
|---|---|
| PURCHASE_AVG_PRICE | Buy hedge using an average price over a period |
| SALE_AVG_PRICE | Sell hedge using an average price over a period |
De-hedging
| Type | Description |
|---|---|
| PURCHASE_DEHEDGE | Closing out a purchase hedge position |
| SALE_DEHEDGE | Closing out a sale hedge position |
| PURCHASE_AVG_PRICE_DEHEDGE | Closing out an average price purchase hedge |
| SALE_AVG_PRICE_DEHEDGE | Closing out an average price sale hedge |
Borrowing & Lending (Carry)
| Type | Description |
|---|---|
| BORROWING | Borrowing metal on the exchange |
| LENDING | Lending metal on the exchange |
| BORROWING_CARRY | Carry trade — borrowing for a forward period |
| LENDING_CARRY | Carry trade — lending for a forward period |
Hedging Markets
| Market | Description |
|---|---|
| LME | London Metal Exchange — primary market for base metals |
| COMEX | Commodity Exchange — part of CME Group, used for metals like copper and gold |
The market determines which commodities and lot sizes are available. Each market has a standard lot size (marketCommodityOneLot) used for quantity calculations.
Hedging Lifecycle
| Status | Meaning |
|---|---|
| OPEN | Contract is active with available quantity |
| PARTIALLY_CLOSED | Some quantity allocated, some remaining |
| CLOSED | Fully allocated or de-hedged |
| PAST | Prompt date has passed |
Parent-Child Relationships
Hedging contracts support parent-child relationships:
- A de-hedge references its parent hedge via
parentHedgingContract - A carry trade references its associated contracts via
carryHedgingContract associatedHedgingContractsgroups related hedges together
Container-Level Hedging
The Container Quality Hedging entity (ContainerQualityHedging) links hedging contracts to specific containers, ensuring every physical unit of cargo has its price risk covered.
How it works
Quantity Types
| Type | Description |
|---|---|
| FIXED_QUANTITY | A specific tonnage is hedged |
| LOADED_WEIGHT_BASED_FORMULA | Hedged quantity derived from loaded weight |
Weight Formulas
| Formula | Description |
|---|---|
| LOADED_WEIGHT | Use the container's loaded weight directly |
| LOADED_WEIGHT_WITH_RECOVERY | Loaded weight adjusted by recovery percentage |
Fields per Container Hedging
| Field | Description |
|---|---|
| Hedging contract | The hedge covering this container |
| Hedged quantity | Volume of material hedged |
| Loaded weight | Actual loaded weight of the container |
| Recovery percentage | Percentage of material recovered (for recovery-based formulas) |
| Is temporary weight | Whether the loaded weight is provisional |
Position Tracking & KPIs
Jules provides aggregate KPIs across all hedging contracts:
| KPI | Description |
|---|---|
| Total Purchased | Sum of all purchase hedge quantities |
| Total Sold | Sum of all sale hedge quantities |
| Total Overall | Net position (purchased - sold) |
Quantity Tracking per Contract
| Field | Description |
|---|---|
| Quantity | Total contracted hedge volume |
| Allocated quantity | Volume already allocated to containers |
| Available quantity | Remaining volume available for allocation |
| De-hedged quantity | Volume that has been de-hedged |
Filtering Hedging Positions
Jules supports filtering to identify coverage gaps:
| Filter | Description |
|---|---|
| PURCHASE_COVERAGE_MISSING | Purchase operations with no hedge coverage |
| SALE_COVERAGE_MISSING | Sale operations with no hedge coverage |
| PURCHASE_COVERAGE_MISSING_PARTIALLY | Purchase operations with partial coverage |
| SALE_COVERAGE_MISSING_PARTIALLY | Sale operations with partial coverage |
Operation-Level Hedging Status
Each operation tracks its overall hedging status:
| Status | Meaning |
|---|---|
| REQUIRED | Hedging is required but not yet in place |
| PARTIALLY_HEDGED | Some containers are hedged, others are not |
| HEDGED | All containers have hedging coverage |
The isHedgingRequired flag on operations and operation qualities determines whether hedging is mandatory for the deal.
Key Business Rules
1. Hedging is quality-level
Hedging is linked at the container quality level, not the container level. This allows different materials within the same container to have different hedging contracts.
2. Prompt date determines lifecycle
The prompt date is the settlement date on the exchange. Once it passes, open contracts move to PAST status.
3. Average price periods
For average price hedges, the average period (start and end dates) defines the time window over which exchange prices are averaged to determine the final hedge price.
4. Carry trades link contracts
Borrowing/lending carry trades create chains of related hedging contracts. The carryHedgingContract field links the carry to its parent contract.
5. De-hedging tracks unwinding
When closing out a position, a de-hedge contract is created referencing the original hedge. The dehedgedQuantity on the original contract is updated accordingly.
6. Department-level hedging
Hedging contracts can be assigned to a department, allowing multi-department organizations to track their hedging positions independently.
Glossary
| Term | Definition |
|---|---|
| Average price hedge | A hedge where the price is the average over a defined period |
| Broker | The intermediary executing hedging trades on an exchange |
| Carry trade | Borrowing or lending metal for a forward period |
| COMEX | Commodity Exchange — part of CME Group |
| Container quality hedging | The link between a hedging contract and a specific container's material |
| De-hedge | Closing out an existing hedge position |
| Hedging contract | A financial instrument covering commodity price risk |
| LME | London Metal Exchange |
| Prompt date | The settlement/delivery date on the exchange |
| Recovery percentage | The percentage of material recovered after processing |
| Trade date | The date a hedging contract was executed |
Last updated 3 days ago
Built with Documentation.AI