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A fundamental principle of derivatives trading is that, by entering a Transaction, you forever change your exposure to the risk it represents. You go from off-risk to on-risk, or vice versa. How to value that risk between times may be hard to know until it finally crystallises, under its terms, into a “settlement obligation” — whereupon you must make or receive delivery or payment of some kind.

By nature, financial risks fluctuate in unpredictable and maddening ways. But while the value of your risk position, once traded, may change, the fact that you have the risk position does not.

This might seem trite, but it is often misunderstood, especially when further down the line, something prevents settlement.

A derivative position seems a rather nebulous thing in the abstract. Before it expires, it does not feel as if the world has changed. In the same way, until the roulette ball has settled its slot, it feels as if a bet placed upon it should be cancellable: this is all very hypothetical, no-one has changed their position in reliance on a still-spinning wheel, yet, so why should a punter not be allowed to back out of the wager, and keep her stake?

This is not how casinos see it, of course. Nor do swaps dealers.

This is quite