Trade the coal location spread.
You act in the role of a coal trader (either as a prop trader or as an asset & portfolio manager).
You act in the capacity of aggressor.
Analyse the price differential between the two products, its minimum and maximum and the volatility of the location spread.
Furthermore, your task is to trade the location spread; setup the spread (a long versus short strategy between different locations).
Check your Value at Risk (VaR) upon opening a position in one leg (contract), either long or short, and see the exposure (VaR) going down (risk mitigation) when you setup an opposing position (long versus short) in the other leg (contract).
As an asset & portfolio trader, you have now hedged the exposure related to available transport capacity (i.e. a vessel) and, therewith, secured future cash flows. Alternatively, as a proprietray trader, you can liquidate your spread position when financially suitable and realise a profit.
Analyse your financial performance.
Watch the Unrealised Result of an open position (“P/L-U”).
See the Realised Result of a closed position (“P/L-R”).