Paper trade

A paper trade is a position in freight derivatives, FFAs, options, or bunker swaps, taken without moving any physical cargo or fixing a vessel. The trader holds a financial exposure to a Baltic index rather than a chartered ship, hence paper rather than physical. Owners sell paper to hedge owned tonnage, charterers buy it to cap freight cost, and speculators take outright positions to profit from rate moves. Paper trades clear through CME, EEX, SGX, ICE, or LCH against the Baltic settlement rate. The distinction matters for risk: a paper book can be opened and closed in seconds, while the physical position is locked to the charter party and the voyage.