Trading Activities

6 Months Ended

Jun. 30, 2018

4.	Trading Activities:

The Partnership was formed for the purpose of trading commodity interests, including derivative financial instruments and derivative commodity instruments.

The Customer Agreement with the Partnership gives the Partnership the legal right to net unrealized gains and losses on open futures and exchange-cleared swaps contracts in the Statements of Financial Condition. The Partnership nets, for financial reporting purposes, the unrealized gains and losses on open futures contracts in the Statements of Financial Condition as the criteria under ASC 210-20, “Balance Sheet,” have been met.

All of the commodity interests owned by the Partnership are held for trading purposes. The monthly average number of futures contracts traded by the Partnership during the three and six months ended June 30, 2018 were 4,815 and 5,647, respectively. The monthly average number of futures contracts traded by the Partnership during the three and six months ended June 30, 2017 were 3,323 and 4,655, respectively. The monthly average number of option contracts traded by the Partnership during the three and six months ended June 30, 2018 were 514 and 366, respectively. The monthly average number of option contracts traded by the Partnership during the three and six months ended June 30, 2017 were 813 and 870, respectively.

Trading and transaction fees are based on the number of trades executed by the Advisor.

The following tables summarize the gross and net amounts recognized relating to assets and liabilities of the Partnership’s derivatives and their offsetting subject to master netting or similar arrangements as of June 30, 2018 and December 31, 2017, respectively.


June 30, 2018	Gross Amounts Recognized		Gross Amounts Offset in the Statements of Financial Condition		Amounts Presented in the Statements of Financial Condition		Gross Amounts Not Offset in the Statements of Financial Condition				Net Amount

							Financial Instruments		Cash Collateral Pledged/Received*
Assets
Futures	$	2,678,898	$	(2,678,898)	$	-	$	-	$	-	$	-

Total assets	$	2,678,898	$	(2,678,898)	$	-	$	-	$	-	$	-

Liabilities
Futures	$	(2,956,493)	$	2,678,898	$	(277,595)	$	-	$	-	$	(277,595)

Total liabilities	$	(2,956,493)	$	2,678,898	$	(277,595)	$	-	$	-	$	(277,595)

Net fair value											$	(277,595)	*


	Gross Amounts Recognized		Gross Amounts Offset in the Statements of Financial Condition		Amounts Presented in the Statements of Financial Condition		Gross Amounts Not Offset in the Statements of Financial Condition				Net Amount

December 31, 2017							Financial Instruments		Cash Collateral Pledged/Received*
Assets
Futures	$	1,884,990	$	(1,884,990)	$	-	$	-	$	-	$	-

Total assets	$	1,884,990	$	(1,884,990)	$	-	$	-	$	-	$	-

Liabilities
Futures	$	(2,013,343)	$	1,884,990	$	(128,353)	$	-	$	-	$	(128,353)

Total liabilities	$	(2,013,343)	$	1,884,990	$	(128,353)	$	-	$	-	$	(128,353)

Net fair value											$	(128,353)	*

In the event of default by the Partnership, MS&Co., the Partnership’s commodity futures broker and the sole counterparty to the Partnership’s non-exchange-traded contracts, as applicable, has the right to offset the Partnership’s obligation with the Partnership’s cash and/or U.S. Treasury bills held by MS&Co., thereby minimizing MS&Co.’s risk of loss. In certain instances, MS&Co. may not post collateral and as such, in the event of default by MS&Co., the Partnership is exposed to the amount shown in the Statements of Financial Condition. In the case of exchange-traded contracts, the Partnership’s exposure to counterparty risk may be reduced since the exchange’s clearinghouse interposes its credit between buyer and seller and the clearinghouse’s guarantee funds may be available in the event of a default.

The following tables indicate the gross fair values of derivative instruments of futures and option contracts as separate assets and liabilities as of June 30, 2018 and December 31, 2017, respectively.


	June 30, 2018
Assets
Futures Contracts
Energy	$	2,678,898

Total unrealized appreciation on open futures contracts		2,678,898


Liabilities
Futures Contracts
Energy		(2,956,493)

Total unrealized depreciation on open futures contracts		(2,956,493)


Net unrealized depreciation on open futures contracts	$	(277,595)	*


Assets
Options Purchased
Energy	$	842,160

Total options purchased	$	842,160	**


Liabilities
Options Written
Energy	$	(750,780)

Total options written	$	(750,780)	***

*	This amount is in “Net unrealized depreciation on open futures contracts” in the Statements of Financial Condition.

**	This amount is in “Options purchased, at fair value” in the Statements of Financial Condition.

***	This amount is in “Options written, at fair value” in the Statements of Financial Condition.


	December 31, 2017
Assets
Futures Contracts
Energy	$	1,884,990

Total unrealized appreciation on open futures contracts		1,884,990


Liabilities
Futures Contracts
Energy		(2,013,343	)

Total unrealized depreciation on open futures contracts		(2,013,343	)


Net unrealized depreciation on open futures contracts	$	(128,353	) *


Liabilities
Options Written
Energy	$	(545,500	)

Total options written	$	(545,500	) **

*	This amount is in “Net unrealized depreciation on open futures contracts” in the Statements of Financial Condition.

**	This amount is in “Options written, at fair value” in the Statements of Financial Condition.

The following table indicates the trading gains and losses, by market sector, on derivative instruments for the three and six months ended June 30, 2018 and 2017, respectively.

Three Months Ended
June 30,

Six Months Ended
June 30,

Sector

2018

2017

2018

2017

Energy

$ (912,011)

$ (861,265)

$ 2,198,051

$ (260,423)

Total

$ (912,011)

***

$ (861,265)

***

$ 2,198,051

***

$ (260,423)

***

***	This amount is in “Total trading results” in the Statements of Income and Expenses and Changes in Partners’ Capital.

Managed Futures Premier Energy Fund L.P. II 10-Q