Application and Strategy in Futures Markets for Carriers

How Carriers Can Use Trucking Freight Futures

 

Though not an expense but rather a revenue, rate per mile is equally important to a Carrier as it is to a Shipper. Inside of the futures market, the Carrier maintains the same level of benefits as does the Shipper, but instead of stabilizing costs, the gain comes in the form of fixed revenues not subject to the volatile price swings associated with over the road freight.

 

Carriers applying futures hedges have the ability to lock in rates for their fleet, as well as provide accurate revenue forecasts, both of which allow for proper budgeting, planning, and expansion of business operations.

 

Obviously, futures trading is a complex undertaking, however, taken at face value and even at its most elementary application, revenues for a Carrier are stabilized and fixed for the duration of the hedge. Whether selling 5,000 bushels of Soft Red Winter Wheat at the CBOT, 1,000 barrels of West Texas Intermediate Crude Oil at the NYMEX, or 1,000 miles of LAX-DAL Dry Van at the Nodal Exchange, the price received for that good or service is fixed, known, and secured.

 

A Carrier can offset their underlying operational revenues with symmetrical gains or losses in the futures market, reducing volatility and uncertainty from a company’s bottom line. Implementation of the correct course of action inside of the futures market gives the Carrier the competitive advantage of moving forward with precise revenue guidance, and the realization of those revenues, regardless of uncontrollable market price movement.

 

Simply stated, a Carrier will know what price their trucks will run at, and will receive those rates irrespective of market conditions, dynamics, or counterparties.

 

Nodal Exchange will list seven of the most highly trafficked lanes, as well as three regional averages and one national aggregate.

 

K-Ratio can assist Carriers in identifying and applying precise correlational strategies between each company’s specific shipment lanes and the exchange traded products, ensuring accurate risk mitigation methods that reduce the volatility associated with freight revenues.

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Information included in this website, including research reports or explanatory/background studies or papers, as well as RSS content feeds, is provided for informational purposes only and has been obtained from sources K-Ratio Advisory, LLC (K-Ratio) believes are reliable; however, K-Ratio makes no representation or warranty regarding the accuracy or reliability of such information or the suitability or appropriateness of such information for any person.The risk of loss in trading or hedging through commodity futures or options can be substantial. You should therefore carefully consider whether such trading or hedging is suitable for you in light of your financial condition. The high degree of leverage that is often obtainable in commodity futures or options can work against you as well as for you. The use of leverage can lead to large losses as well as gains.Managed futures or options should only be considered after careful review of all material factors, including but not limited to disclosures regarding risks, fees and charges and liquidity. Managed futures or options accounts are subject to charges for management and advisory fees. It may be necessary for such accounts to produce substantial trading profits to avoid depletion or exhaustion of assets.This brief statement cannot identify all of the risks and other material aspects of the futures markets. Neither CFTC nor NFA has passed upon the merits of participating in any program offered by K-Ratio or on the adequacy or accuracy of information contained in this website.PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. THE POTENTIAL FOR PROFIT IS ACCOMPANIED BY THE RISK OF LOSS.