5. DERIVATIVE INSTRUMENTS

6 Months Ended

Jun. 30, 2014

The Partnership engages in the speculative trading of futures and options on futures contracts in currencies, financials, stock indices and a wide range of commodities, among others, (collectively, “derivatives”) for the purpose of achieving capital appreciation. Since the derivatives held or sold by the Partnership are for speculative trading purposes, the derivative instruments are not designated as hedging instruments as defined in ASC Topic 815, Derivatives and Hedging.

Under provisions of ASC Topic 815, Derivatives and Hedging, entities are required to recognize all derivative instruments as either assets or liabilities at fair value in the statement of financial condition. Investments in futures contracts are reported in the Statements of Financial Condition as “Net unrealized (losses) on open futures contracts.”

The Partnership’s derivatives held at June 30, 2014 and December 31, 2013 are subject to agreements similar to master netting agreements with the Partnership’s brokers which grant the brokers the right to set off recognized assets and liabilities if certain conditions exist. The following tables present gross amounts of assets and liabilities which are offset in the Statements of Financial Condition.

	Offsetting of Derivative Assets and Liabilities
	As of June 30, 2014
				Gross Amounts			Net amount
				Offset in the			Presented in the
	Gross Amounts			Statement of			Statement of
	of Recognized			Financial			Financial
	Assets			Condition			Condition
Assets
Futures Contracts⁽¹⁾
Newedge USA, LLC	$	9,088		$	(9,088	)	$	-
Total futures contracts	$	9,088		$	(9,088	)	$	-

				Gross Amounts			Net amount
				Offset in the			Presented in the
	Gross Amounts			Statement of			Statement of
	of Recognized			Financial			Financial
	Liabilities			Condition			Condition
Liabilities
Futures Contracts⁽¹⁾
Newedge USA, LLC	$	(13,026	)	$	9,088		$	(3,938	)
Total futures contracts	$	(13,026	)	$	9,088		$	(3,938	)

(1)See Note 4. for the fair value by type of contract within the category.

	Offsetting of Derivative Assets and Liabilities
	As of December 31, 2013
				Gross Amounts			Net amount
				Offset in the			Presented in the
	Gross Amounts			Statement of			Statement of
	of Recognized			Financial			Financial
	Assets			Condition			Condition
Assets
Futures Contracts⁽¹⁾
Newedge USA, LLC	$	188,888		$	(188,888	)	$	-
Total futures contracts	$	188,888		$	(188,888	)	$	-

				Gross Amounts			Net amount
				Offset in the			Presented in the
	Gross Amounts			Statement of			Statement of
	of Recognized			Financial			Financial
	Liabilities			Condition			Condition
Liabilities
Futures Contracts⁽¹⁾
Newedge USA, LLC	$	(272,261	)	$	188,888		$	(83,373	)
Total futures contracts	$	(272,261	)	$	188,888		$	(83,373	)

^{(1)See
Note 4. for the fair value by type of contract within the category.}

The cash held at each counterparty at June 30, 2014 and December 31, 2013 exceeds the net derivatives liability, if any, at such counterparty.

Realized gains and losses, as well as any change in net unrealized gains or losses on open contracts from the preceding period, are recognized as part of the Partnership’s trading profits and losses in the Statements of Income (Loss).

The Partnership’s trading results and information related to volume of the Partnership’s derivative activity by market sector were as follows:


	For the Three Months Ended June 30, 2014
				Change in		Net		Number of
	Net Realized			Net Unrealized		Trading		Closed
Futures Contracts	(Losses)			Gains		Profits (Losses)		Positions
Metals	$	(11,018	)	$	11,018	$	-		18
Total gain (loss) from derivatives trading	$	(11,018	)	$	11,018	$	-		18


	For the Six Months Ended June 30, 2014
				Change in			Net			Number of
	Net Realized			Net Unrealized			Trading			Closed
Futures Contracts	(Losses)			Gains			Profits (Losses)			Positions
Commodities	$	(9,862	)	$	614		$	(9,248	)		610
Financials		(4,791	)		-			(4,791	)		186
Metals		(78,821	)		78,821			-			64
Stock indices		(1,572	)		-			(1,572	)		540
Total gain (loss) from futures trading	$	(95,046	)	$	79,435		$	(15,611	)		1,400

Options on futures contracts
Commodities		(15,264	)		-			(15,264	)		342

Total gain (loss) from derivatives trading	$	(110,310	)	$	79,435		$	(30,875	)		1,742

	For the Three Months Ended June 30, 2013
				Change in			Net			Number of
	Net Realized			Net Unrealized			Trading			Closed
Futures Contracts	(Losses)			Gains (Losses)			Profits (Losses)			Positions
Commodities	$	(22,727	)	$	28,889		$	6,162			240
Currencies		(87,146	)		10,388			(76,758	)		106
Energy		(163,621	)		77,243			(86,378	)		254
Financials		(35,918	)		(8,064	)		(43,982	)		608
Metals		(79,860	)		214,900			135,040			168
Stock indices		(47,107	)		(27,716	)		(74,823	)		438
Total gain (loss) from derivatives trading	$	(436,379	)	$	295,640		$	(140,739	)		1,814


	For the Six Months Ended June 30, 2013
	Net Realized			Change in			Net			Number of
	Gains			Net Unrealized			Trading			Closed
Futures Contracts	(Losses)			Gains (Losses)			Profits (Losses)			Positions
Commodities	$	(5,174	)	$	30,529		$	25,355			550
Currencies		11,007			(40,167	)		(29,160	)		308
Energy		(110,378	)		47,912			(62,466	)		450
Financials		(126,648	)		37,655			(88,993	)		1,188
Metals		(167,841	)		309,644			141,803			370
Stock indices		100,546			(36,812	)		63,734			1,012
Total gain (loss) from derivatives trading	$	(298,488	)	$	348,761		$	50,273			3,878

The number of contracts closed for futures and options on futures contracts represents the number of contract half-turns during the three and six months ended June 30, 2014 and 2013.

A. Market Risk

The Partnership engages in the speculative trading of derivatives. Derivative financial instruments involve varying degrees of off-balance sheet market risk whereby changes in the level of volatility of interest rates, foreign currency exchange rates or market values of the underlying financial instruments or commodities may result in cash settlements in excess of the amounts recognized in the Statements of Financial Condition. The Partnership’s exposure to market risk is directly influenced by a number of factors, including the volatility of the markets in which the financial instruments are traded and the liquidity of those markets.

B. Fair Value

The derivative instruments used in the Partnership’s trading activities are reported at fair value with the resulting unrealized gains (losses) recorded in the Statements of Financial Condition and the related trading profits (losses) reflected in “Trading Profits (Losses)” in the Statements of Income (Loss). Open contracts generally mature within 90 days; as of June 30, 2014 and December 31, 2013, the latest maturity dates for open contracts are September 2014 and December 2014, respectively.

C. Credit Risk

Futures are contracts for delayed delivery of financial interests in which the seller agrees to make delivery at a specified future date of a specified financial instrument at a specified price or yield. Risk arises from changes in the fair value of the underlying instruments. The purchase and sale of futures contracts requires certain margin deposits with the brokers. Additional deposits may be necessary for any loss on contract fair value. The Commodity Exchange Act requires a broker to segregate all customer transactions and assets from such broker's proprietary activities. A customer's cash and other property (for example, U.S. Treasury bills) deposited with a broker are considered commingled with all other customer funds subject to the broker's segregation requirements. In the event of a broker's insolvency, recovery may be limited to a pro rata share of segregated funds available. It is possible that the recovered amount could be less than total cash and other property deposited with such brokers (“counterparties"). The Partnership’s counterparties with respect to the trading of futures contracts and options on futures contracts are major brokerage firms and banks located in the United States, or their foreign affiliates. As both a buyer and seller of options, the Partnership pays or receives a premium at the outset and then bears the risk of unfavorable changes in the price of the contract underlying the option. Written options expose the Partnership to potentially unlimited liability, and purchased options expose the Partnership to a risk of loss limited to the premiums paid. Credit risk due to counterparty nonperformance associated with futures contracts and options on futures contracts is reflected in the cash on deposit with brokers and the unrealized gains on open contracts held by such counterparties, if any, reflected above.

The Partnership has a substantial portion of its assets on deposit with brokers and other financial institutions in connection with its trading of derivative contracts and its cash management activities. Assets deposited with such brokers, dealers and other financial institutions in connection with the Partnership's trading of derivative contracts are partially restricted due to deposit or margin requirements. In the event of a financial institution's insolvency, recovery of the Partnership's assets on deposit may be limited to account insurance or other protection afforded such deposits.

D.	Risk Monitoring

Due to the speculative nature of the Partnership’s derivatives trading, the Partnership is subject to the risk of substantial losses from derivatives trading. The General Partner actively assesses, manages, and monitors risk exposure on derivatives on a contract basis, a market sector basis, and on an overall basis in accordance with established risk parameters. The Limited Partners bear the risk of loss only to the extent of the fair value of their respective investments and, in certain specific circumstances, distributions and redemptions received.

- Definition

The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts.

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Endeavor Emerging Opportunities Fund, LP 10-Q