UNITED STATES
    SECURITIES AND EXCHANGE COMMISSION
    WASHINGTON, D.C. 20549
  FORM 10-Q
  (X) QUARTERLY REPORT PURSUANT TO SECTION 13 or
    15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
  For the quarterly period ended September 30, 2010
  OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
    THE SECURITIES EXCHANGE ACT OF 1934
  
  000-50735
  POTOMAC FUTURES FUND L.P.
     New York

13-3937275(State or other jurisdiction of
    incorporation or organization)

(I.R.S. Employer
    Identification No.)   c/o Ceres
    Managed Futures LLC
 522 Fifth Avenue -
14th
Floor
 New York, New York 10036
     (212) 296-1999
       Yes X  No
    Yes   No
  Rule 12b-2
  Large
    accelerated filer
    Accelerated filer
    Non-accelerated filer X
    Smaller reporting company  rule 12b-2
  Yes   No X




---



##### 



POTOMAC FUTURES FUND L.P.
  FORM 10-Q
  INDEX
  PageNumberPART I - Financial Information:Item 1.

Financial Statements:Statements of Financial Condition
    at
September 30, 2010 (unaudited) and December 31, 2009

3Statements of Income and Expenses
    and Changes in Partners Capital for the three and nine
    months ended September 30, 2010  and 2009 (unaudited)

4Notes to Financial Statements, including the Financial
    Statements of CMF Campbell Master Fund L.P.
    (unaudited)

5 - 21Item 2.

Managements Discussion and
    Analysis of Financial Condition
    and Results of Operations

22  25Item 3.

Quantitative and Qualitative
    Disclosures about Market Risk

26  27Item 4.

Controls and Procedures

28PART II - Other Information

29  32ExhibitsExhibit 31.1
CertificationExhibit 31.2
CertificationExhibit 32.1
CertificationExhibit 32.2
Certification  2




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##### 



PART I Item 1.
    Financial Statements  Potomac Futures Fund L.P.
    Statements of Financial Condition  (Unaudited)September 30,


December 31,2010


2009Assets:Investment in Master, at fair value

$
39,556,511


$
52,227,304Cash


39,823



105,370Total assets

$
39,596,334


$
52,332,674Liabilities and Partners Capital:Liabilities:Accrued expenses:Brokerage fees

$
214,480


$
283,469Management fees


65,597



86,598Other


23,748



90,507Redemptions payable


2,748,411



1,730,773Total liabilities


3,052,236



2,191,347Partners Capital:General Partner, 337.4926 and 624.1683 unit equivalents
outstanding at September 30, 2010
    and December 31, 2009, respectively


459,365



839,974Limited Partners, 26,511.1743 and 36,634.7661 Redeemable
    Units outstanding
at September 30, 2010 and December 31, 2009, respectively


36,084,733



49,301,353Total partners capital


36,544,098



50,141,327Total liabilities and partners capital

$
39,596,334


$
52,332,674Net asset value per unit

$
1,361.11


$
1,345.75    3




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##### 



Potomac Futures Fund L.P.
    Statements of Income and Expenses and Changes in Partners Capital
    (Unaudited) Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Income:Net realized
gains (losses) on closed contracts allocated from Master
    
    $
    1,292,553
    
    
    $
    216,248
    
    
    $
    (298,345
    )
    
    $
    (3,845,309
    )Change in
net unrealized gains (losses) on open contracts allocated
from Master
    
    
    2,291,140
    
    
    
    2,338,865
    
    
    
    3,109,317
    
    
    
    2,272,126Interest income allocated from Master
    
    
    10,569
    
    
    
    13,457
    
    
    
    27,367
    
    
    
    44,778Expenses allocated from Master
    
    
    (43,297
    )
    
    
    (22,967
    )
    
    
    (139,303
    )
    
    
    (58,442
    )Total income (loss)
    
    
    3,550,965
    
    
    
    2,545,603
    
    
    
    2,699,036
    
    
    
    (1,586,847
    )Expenses:Brokerage fees
    
    
    643,222
    
    
    
    1,005,655
    
    
    
    2,137,724
    
    
    
    3,428,819Management fees
    
    
    196,719
    
    
    
    307,305
    
    
    
    653,370
    
    
    
    1,047,877Other
    
    
    45,466
    
    
    
    35,268
    
    
    
    146,978
    
    
    
    157,429Total expenses
    
    
    885,407
    
    
    
    1,348,228
    
    
    
    2,938,072
    
    
    
    4,634,125Net income (loss)
    
    
    2,665,558
    
    
    
    1,197,375
    
    
    
    (239,036
    )
    
    
    (6,220,972
    )Additions  Limited Partners
    
    
    581,000
    
    
    
    212,000
    
    
    
    895,000
    
    
    
    2,181,000Redemptions  Limited Partners
    
    
    (8,044,560
    )
    
    
    (9,101,992
    )
    
    
    (13,878,193
    )
    
    
    (26,340,714
    )Redemptions  General Partner
    
    
    
    
    
    
    
    
    
    
    (375,000
    )
    
    
    (147,584
    )Net increase (decrease) in partners capital
    
    
    (4,798,002
    )
    
    
    (7,692,617
    )
    
    
    (13,597,229
    )
    
    
    (30,528,270
    )Partners Capital, beginning of period
    
    
    41,342,100
    
    
    
    62,818,850
    
    
    
    50,141,327
    
    
    
    85,654,503Partners Capital, end of period
    
    $
    36,544,098
    
    
    $
    55,126,233
    
    
    $
    36,544,098
    
    
    $
    55,126,233Net asset value per unit (26,848.6669 and 39,805.7587 units
outstanding at September 30, 2010 and 2009, respectively)
    
    $
    1,361.11
    
    
    $
    1,384.88
    
    
    $
    1,361.11
    
    
    $
    1,384.88Net income (loss) per Redeemable Unit and General Partner unit equivalent
    
    $
    94.92
    
    
    $
    29.24
    
    
    $
    15.36
    
    
    $
    (120.70
    )Weighted average units outstanding
    
    
    30,235.4398
    
    
    
    45,235.6473
    
    
    
    33,906.4130
    
    
    
    49,218.3844
    4




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##### 



Potomac Futures Fund L.P.
    Notes to Financial Statements
September 30, 2010
    (Unaudited)  1.
    General:             5




---



##### 



Potomac Futures Fund L.P.

    Notes to Financial Statements
September 30, 2010
    (Unaudited)
  Form 10-K
       6




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##### 



Potomac Futures Fund L.P.
    Notes to Financial Statements
    September 30, 2010
    (Unaudited)
    CMF
    Campbell Master Fund L.P.
    Statements of Financial Condition
  (Unaudited)September 30,
    
    
    December 31,2010
    
    
    2009Assets:Equity in trading account:Cash
    
    $
    35,165,773
    
    
    $
    57,797,715Cash margin
    
    
    5,348,419
    
    
    
    5,501,376Net unrealized appreciation on open futures contracts
    
    
    1,627,084
    
    
    
    Net unrealized appreciation on open forward contracts
    
    
    933,457
    
    
    
    Options
purchased, at fair value (cost $27,294 and
$96,122 at September 30, 2010 and December 31, 2009, respectively)
    
    
    29,687
    
    
    
    94,039Total assets
    
    $
    43,104,420
    
    
    $
    63,393,130Liabilities and Partners Capital:Liabilities:Net unrealized depreciation on open futures contracts
    
    $
    
    
    
    $
    366,940Net unrealized depreciation on open forward contracts
    
    
    
    
    
    
    431,591Options
premiums received, at fair value (premium $34,672 and
$34,361 at September 30, 2010 and December 31, 2009, respectively)
    
    
    30,396
    
    
    
    35,406Accrued expenses:Professional fees
    
    
    31,316
    
    
    
    33,530Total liabilities
    
    
    61,712
    
    
    
    867,467Partners Capital:General
Partner, 0.0000 unit equivalents at September 30, 2010 and
December 31, 2009
    
    
    
    
    
    
    Limited
Partners, 36,009.3884 and 56,557.8676
units outstanding at September 30, 2010
and December 31, 2009, respectively
    
    
    43,042,708
    
    
    
    62,525,663Total liabilities and partners capital
    
    $
    43,104,420
    
    
    $
    63,393,130Net asset value per
 unit
    
    $
    1,195.32
    
    
    $
    1,105.52
  7




---



##### 



Potomac Futures Fund L.P.
    Notes to Financial Statements
    September 30, 2010
    (Unaudited)
  CMF
    Campbell Master Fund L.P.
    Condensed Schedule of Investments
    September 30, 2010
    (Unaudited)
  Notional ($)/ Number
    
    
    
    
    
    
    % of Partnersof Contracts
    
    
    Fair Value
    
    
    CapitalFutures Contracts PurchasedEnergy
    
    
    21
    
    
    $
    67,585
    
    
    
    0.16
    %Grains
    
    
    140
    
    
    
    124,725
    
    
    
    0.29Interest Rates Non-U.S.
    
    
    611
    
    
    
    385,504
    
    
    
    0.90Interest Rates U.S.
    
    
    535
    
    
    
    216,097
    
    
    
    0.50Indices
    
    
    345
    
    
    
    87,003
    
    
    
    0.20Livestock
    
    
    17
    
    
    
    (160
    )
    
    
    (0.00
    )*Metals
    
    
    77
    
    
    
    634,755
    
    
    
    1.47Softs
    
    
    102
    
    
    
    203,520
    
    
    
    0.47Total futures contracts purchased
    
    
    
    
    
    
    1,719,029
    
    
    
    3.99Futures Contracts SoldEnergy
    
    
    22
    
    
    
    (88,710
    )
    
    
    (0.20
    )Interest Rates Non-U.S.
    
    
    21
    
    
    
    (3,115
    )
    
    
    (0.01
    )Indices
    
    
    6
    
    
    
    (120
    )
    
    
    (0.00
    )*Total futures contracts sold
    
    
    
    
    
    
    (91,945
    )
    
    
    (0.21
    )Unrealized Appreciation on Forward ContractsCurrencies
    
    
    $146,281,976
    
    
    
    3,816,670
    
    
    
    8.87Metals
    
    
    68
    
    
    
    303,001
    
    
    
    0.70Total unrealized appreciation on forward contracts
    
    
    
    
    
    
    4,119,671
    
    
    
    9.57Unrealized Depreciation on Forward ContractsCurrencies
    
    
    $117,516,694
    
    
    
    (3,108,327
    )
    
    
    (7.22
    )Metals
    
    
    15
    
    
    
    (77,887
    )
    
    
    (0.18
    )Total unrealized depreciation on forward contracts
    
    
    
    
    
    
    (3,186,214
    )
    
    
    (7.40
    )Options PurchasedCurrenciesCalls
    
    
    $2,230,803
    
    
    
    27,055
    
    
    
    0.06Puts
    
    
    $1,077,008,383
    
    
    
    2,632
    
    
    
    0.01Total options purchased
    
    
    
    
    
    
    29,687
    
    
    
    0.07Options Premiums ReceivedCurrenciesCalls
    
    
    $13,742,138
    
    
    
    (28,600
    )
    
    
    (0.07
    )Puts
    
    
    $7,609,125,631
    
    
    
    (1,796
    )
    
    
    (0.00
    )*Total options premiums received
    
    
    
    
    
    
    (30,396
    )
    
    
    (0.07
    )Total fair value
    
    
    
    
    
    $
    2,559,832
    
    
    
    5.95
    %
 * Due to rounding. 8




---



##### 



Potomac Futures Fund L.P.Notes to Financial
StatementsSeptember 30, 2010(Unaudited)
  CMF
    Campbell Master Fund L.P.Condensed Schedule of
InvestmentsDecember 31, 2009
 Notional ($)/Number of





% of PartnersContracts


Fair Value


CapitalFutures Contracts PurchasedEnergy


36


$
21,183



0.03
%Grains


3



2,325



0.00
*Interest Rates
    Non-U.S.


446



(283,167
)


(0.45
)Interest Rates U.S.


507



(493,888
)


(0.79
)Indices


455



441,278



0.71Metals


18



(83,265
)


(0.13
)Softs


22



(4,234
)


(0.00
)*Total futures contracts purchased






(399,768
)


(0.63
)Futures Contracts SoldEnergy


1



2,730



0.00
*Grains


9



2,750



0.00
*Interest Rates
    Non-U.S.


136



26,911



0.04Interest Rates U.S.


2



437



0.00
*Total futures contracts sold






32,828



0.04Unrealized Appreciation on Forward ContractsCurrencies


$135,784,768



2,033,847



3.25Metals


37



285,660



0.46Total unrealized appreciation on forward contracts






2,319,507



3.71Unrealized Depreciation on Forward ContractsCurrencies


$154,270,721



(2,642,315
)


(4.23
)Metals


17



(108,783
)


(0.17
)Total unrealized depreciation on forward contracts






(2,751,098
)


(4.40
)Options PurchasedCurrenciesCalls


$2,499,064,517



49,773



0.08Puts


$430,245,216



44,266



0.07Total options purchased






94,039



0.15Options Premiums ReceivedCurrenciesCalls


$13,333,773



(26,438
)


(0.04
)Puts


$43,764,467,517



(8,968
)


(0.01
)Total premiums received






(35,406
)


(0.05
)Total fair value





$
(739,898
)


(1.18
)%   *
    
    Due to rounding.
 9




---



##### 



Potomac Futures Fund L.P.
    Notes to Financial Statements
    September 30, 2010
    (Unaudited)
  CMF
    Campbell Master Fund L.P.
    Statements of Income and Expenses and Changes in Partners Capital
    (Unaudited)
   Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Income:Net gains (losses) on trading of commodity interests:Net realized gains (losses) on closed contracts
    
    $
    1,410,580
    
    
    $
    258,641
    
    
    $
    (580,712
    )
    
    $
    (4,873,481
    )Change in net unrealized gains (losses) on open contracts
    
    
    2,492,377
    
    
    
    2,831,207
    
    
    
    3,368,871
    
    
    
    2,262,189Gain (loss) from trading, net
    
    
    3,902,957
    
    
    
    3,089,848
    
    
    
    2,788,159
    
    
    
    (2,611,292
    )Interest income
    
    
    11,457
    
    
    
    16,320
    
    
    
    29,887
    
    
    
    60,078Total income (loss)
    
    
    3,914,414
    
    
    
    3,106,168
    
    
    
    2,818,046
    
    
    
    (2,551,214
    )Expenses:Clearing fees
    
    
    32,578
    
    
    
    19,963
    
    
    
    89,523
    
    
    
    48,121Professional fees
    
    
    14,379
    
    
    
    7,837
    
    
    
    63,601
    
    
    
    28,810Total expenses
    
    
    46,957
    
    
    
    27,800
    
    
    
    153,124
    
    
    
    76,931Net income (loss)
    
    
    3,867,457
    
    
    
    3,078,368
    
    
    
    2,664,922
    
    
    
    (2,628,145
    )Additions  Limited Partners
    
    
    581,000
    
    
    
    212,000
    
    
    
    895,000
    
    
    
    2,181,000Redemptions  Limited Partners
    
    
    (6,908,044
    )
    
    
    (10,771,724
    )
    
    
    (23,012,990
    )
    
    
    (54,434,556
    )Distribution
of interest income to feeder funds
    
    
    (11,457
    )
    
    
    (16,320
    )
    
    
    (29,887
    )
    
    
    (60,078
    )Net increase (decrease) in Partners Capital
    
    
    (2,471,044
    )
    
    
    (7,497,676
    )
    
    
    (19,482,955
    )
    
    
    (54,941,779
    )Partners Capital, beginning of period
    
    
    45,513,752
    
    
    
    80,030,859
    
    
    
    62,525,663
    
    
    
    127,474,962Partners Capital, end of period
    
    $
    43,042,708
    
    
    $
    72,533,183
    
    
    $
    43,042,708
    
    
    $
    72,533,183Net asset value per unit
(36,009.3884 and 65,191.0739 Units outstanding at
September 30, 2010 and 2009, respectively)
    
    $
    1,195.32
    
    
    $
    1,112.62
    
    
    $
    1,195.32
    
    
    $
    1,112.62Net income (loss) per  unit
    
    $
    108.15
    
    
    $
    47.10
    
    
    $
    90.49
    
    
    $
    (19.54
    )Weighted average units outstanding
    
    
    39,986.9154
    
    
    
    72,549.5908
    
    
    
    46,891.4394
    
    
    
    90,602.3699
  10




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##### 



Potomac Futures Fund L.P.
    Notes to Financial Statements
September 30, 2010
    (Unaudited)
  2.
    Financial
    Highlights:    Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Net realized
and unrealized gains (losses) allocated from Master*
    
    $
    103.05
    
    
    $
    36.68
    
    
    $
    39.89
    
    
    $
    (96.77
    )Interest
income allocated from Master
    
    
    0.35
    
    
    
    0.30
    
    
    
    0.83
    
    
    
    0.93Expenses **
    
    
    (8.48
    )
    
    
    (7.74
    )
    
    
    (25.36
    )
    
    
    (24.86
    )Increase
(decrease) for the period
    
    
    94.92
    
    
    
    29.24
    
    
    
    15.36
    
    
    
    (120.70
    )Net asset
value per unit, beginning of period
    
    
    1,266.19
    
    
    
    1,355.64
    
    
    
    1,345.75
    
    
    
    1,505.58Net asset
value per unit, end of period
    
    $
    1,361.11
    
    
    $
    1,384.88
    
    
    $
    1,361.11
    
    
    $
    1,384.88
   *
    
    Includes Partnership brokerage fees and clearing fees
    allocated from the Master.**
    
    Excludes Partnership brokerage fees and clearing fees
    allocated from the Master.  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Ratio to
average net assets:***Net
investment income (loss) before incentive fees****
    
    
    (9.6
    )%
    
    
    (9.0
    )%
    
    
    (9.6
    )%
    
    
    (9.0
    )%Operating
expenses
    
    
    9.7
    %
    
    
    9.1
    %
    
    
    9.6
    %
    
    
    9.1
    %Incentive fees
    
    
    
    %
    
    
    
    %
    
    
    
    %
    
    
    
    %Total
expenses
    
    
    9.7
    %
    
    
    9.1
    %
    
    
    9.6
    %
    
    
    9.1
    %Total return:Total return before incentive fees
    
    
    7.5
    %
    
    
    2.2
    %
    
    
    1.1
    %
    
    
    (8.0
    )%Incentive fees
    
    
    
    %
    
    
    
    %
    
    
    
    %
    
    
    
    %Total return after incentive fees
    
    
    7.5
    %
    
    
    2.2
    %
    
    
    1.1
    %
    
    
    (8.0
    )%
   ***
    
    Annualized (other than incentive fee).****
    
    Interest income allocated from Master less total expenses.   11




---



##### 



Potomac Futures Fund L.P.
    Notes to Financial Statements
September 30, 2010
    (Unaudited)
    Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Net realized and unrealized gains (losses)*
    
    $
    108.24
    
    
    $
    46.99
    
    
    $
    91.25
    
    
    $
    (19.91
    )Interest income
    
    
    0.29
    
    
    
    0.23
    
    
    
    0.69
    
    
    
    0.71Expenses **
    
    
    (0.38
    )
    
    
    (0.12
    )
    
    
    (1.45
    )
    
    
    (0.34
    )Increase (decrease) for the period
    
    
    108.15
    
    
    
    47.10
    
    
    
    90.49
    
    
    
    (19.54
    )Distribution
of interest income to feeder funds
    
    
    (0.29
    )
    
    
    (0.23
    )
    
    
    (0.69
    )
    
    
    (0.71
    )Net asset
value per unit, beginning of period
    
    
    1,087.46
    
    
    
    1,065.75
    
    
    
    1,105.52
    
    
    
    1,132.87Net asset
value per unit, end of period
    
    $
    1,195.32
    
    
    $
    1,112.62
    
    
    $
    1,195.32
    
    
    $
    1,112.62*     Includes clearing fees.**   Excludes clearing fees.Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Ratios to Average Net Assets:***Net
investment income (loss)****
    
    
    (0.3
    )%
    
    
    (0.1
    )%
    
    
    (0.3
    )%
    
    
    0.0
    %*****Operating
expenses
    
    
    0.4
    %
    
    
    0.1
    %
    
    
    0.4
    %
    
    
    0.1
    %Total return
    
    
    9.9
    %
    
    
    4.4
    %
    
    
    8.2
    %
    
    
    (1.7
    )%
 ***
    
    Annualized.****
    
    Interest income less total expenses.*****
    
    Due to rounding.   3. Trading Activities:
       12




---



##### 



Potomac Futures Fund L.P.
    Notes to Financial Statements
September 30, 2010
    (Unaudited)
   Assets
    
    September 30, 2010Futures
ContractsEnergy
    
    $
    68,465Grains
    
    
    213,600Interest Rates Non-U.S.
    
    
    506,004Interest Rates U.S.
    
    
    221,163Indices
    
    
    172,929Livestock
    
    
    1,390Metals
    
    
    635,175Softs
    
    
    239,716Total unrealized appreciation on open futures contracts
    
    $
    2,058,442LiabilitiesFutures
ContractsEnergy
    
    $
    (89,590
    )Grains
    
    
    (88,875
    )Interest Rates Non-U.S.
    
    
    (123,615
    )Interest Rates U.S.
    
    
    (5,066
    )Indices
    
    
    (86,046
    )Livestock
    
    
    (1,550
    )Metals
    
    
    (420
    )Softs
    
    
    (36,196
    )Total unrealized depreciation on open futures contracts
    
    $
    (431,358
    )Net unrealized appreciation on open futures contracts
    
    $
    1,627,084
    *AssetsForward
ContractsCurrencies
    
    $
    3,816,670Metals
    
    
    303,001Total unrealized appreciation on open forward contracts
    
    $
    4,119,671LiabilitiesForward
ContractsCurrencies
    
    $
    (3,108,327
    )Metals
    
    
    (77,887
    )Total unrealized depreciation on open forward contracts
    
    $
    (3,186,214
    )Net unrealized appreciation on open forward contracts
    
    $
    933,457
    **
   *
    
    This amount is in Net unrealized appreciation on open
    futures contracts on the Masters Statements of
    Financial Condition.**
    
    This amount is in Net unrealized appreciation on open
    forward contracts on the Masters Statements of
    Financial Condition.  13




---



##### 



Potomac Futures Fund L.P.
    Notes to Financial Statements
September 30, 2010
    (Unaudited)
  Assets

September 30, 2010Options PurchasedCurrencies

$
29,687Total options purchased

$
29,687
***LiabilitiesOptions Premiums ReceivedCurrencies

$
(30,396
)Total options premiums received

$
(30,396
)*******  
    This amount is in Options purchased, at fair value on
    the Masters Statements of Financial Condition.**** This amount is in Options premiums received, at fair value on
    the Masters Statements of Financial Condition.Assets

December 31, 2009Futures ContractsEnergy

$
28,837Grains


5,075Interest Rates
    Non-U.S.


76,641Interest Rates U.S.


437Indices


480,732Metals


410Softs


19,185Total unrealized appreciation on open futures contracts

$
611,317LiabilitiesFutures ContractsEnergy

$
(4,924
)Interest Rates
    Non-U.S.


(332,897
)Interest Rates U.S.


(493,888
)Indices


(39,454
)Metals


(83,675
)Softs


(23,419
)Total unrealized depreciation on open futures contracts

$
(978,257
)Net unrealized depreciation on open futures contracts

$
(366,940
)*AssetsForward ContractsCurrencies

$
2,033,847Metals


285,660Total unrealized appreciation on open forward contracts

$
2,319,507LiabilitiesForward ContractsCurrencies

$
(2,642,315
)Metals


(108,783
)Total unrealized depreciation on open forward contracts

$
(2,751,098
)Net unrealized depreciation on open forward contracts

$
(431,591
)***   This amount is in Net unrealized depreciation on open
    futures contracts on the Masters Statements of
    Financial Condition.** This amount is in Net unrealized depreciation on open
    forward contracts on the Masters Statements of
    Financial Condition. 14




---



##### 



Potomac Futures Fund L.P.
    Notes to Financial Statements
September 30, 2010
    (Unaudited)
 Assets

December 31, 2009Options PurchasedCurrencies

$
94,039Total options purchased

$
94,039
***LiabilitiesOptions Premiums ReceivedCurrencies

$
(35,406
)Total options premiums received

$
(35,406
)****   ***
    
    This amount is in Options purchased, at fair value on
    the Masters Statements of Financial Condition.****
    
    This amount is in Options premiums received, at fair value on
    the Masters Statements of Financial Condition.  Three Months Ended
    
    
    Three Months Ended
    
    
    Nine months ended
    
    
    Nine months endedSeptember 30, 2010
    
    
    September 30, 2009
    
    
    September 30, 2010
    
    
    September 30, 2009Sector
    
    Gain (loss) from trading
    
    
    Gain (loss) from trading
    
    
    Gain (loss) from trading
    
    
    Gain (loss) from tradingCurrencies
    
    $
    735,747
    
    
    $
    2,299,932
    
    
    $
    394,295
    
    
    $
    1,470,394Energy
    
    
    (659,349
    )
    
    
    (871,574
    )
    
    
    (2,641,886
    )
    
    
    (662,653
    )Grains
    
    
    596,097
    
    
    
    84,963
    
    
    
    655,258
    
    
    
    84,963Indices
    
    
    325,881
    
    
    
    1,486,707
    
    
    
    (3,011,390
    )
    
    
    (1,475,502
    )Interest Rates U.S.
    
    
    1,167,263
    
    
    
    (227,827
    )
    
    
    2,828,152
    
    
    
    364,535Interest Rates Non-U.S.
    
    
    486,333
    
    
    
    (340,758
    )
    
    
    4,208,592
    
    
    
    (2,088,282
    )Livestock
    
    
    (39,780
    )
    
    
    
    
    
    
    (54,780
    )
    
    
    Metals
    
    
    565,058
    
    
    
    834,259
    
    
    
    (198,989
    )
    
    
    (128,893
    )Softs
    
    
    725,707
    
    
    
    (175,854
    )
    
    
    608,907
    
    
    
    (175,854
    )Total
    
    $
    3,902,957
    *****
    
    $
    3,089,848
    *****
    
    $
    2,788,159
    *****
    
    $
    (2,611,292
    )*****
 
 *****
    
    This amount is in Gain (loss) from trading, net on the Masters Statements of Income and Expenses and Changes in Partners Capital.  4.
    Fair
    Value Measurements:  Partnerships Investments.
 Partnerships Fair
Value Measurements.
  15




---



##### 



Potomac Futures Fund L.P.
    Notes to Financial Statements
September 30, 2010
    (Unaudited)
   Quoted Pricesin Active Markets


Significant Other


Significantfor Identical


Observable Inputs


Unobservable9/30/2010


Assets (Level 1)


(Level 2)


Inputs (Level 3)AssetsInvestment in Master

$
39,556,511


$



$
39,556,511


$
Total fair value

$
39,556,511


$



$
39,556,511


$
Quoted Prices inActive Markets
    
    
    Significant Other
    
    
    Significantfor Identical
    
    
    Observable Inputs
    
    
    Unobservable12/31/2009
    
    
    Assets (Level 1)
    
    
    (Level 2)
    
    
    Inputs (Level 3)AssetsInvestment in Master
    
    $
    52,227,304
    
    
    $
    
    
    
    $
    52,227,304
    
    
    $
    Total fair value
    
    $
    52,227,304
    
    
    $
    
    
    
    $
    52,227,304
    
    
    $
      Masters Investments.
 Masters Fair
Value Measurements.
 16




---



##### 



Potomac Futures Fund L.P.
    Notes to Financial Statements
September 30, 2010
    (Unaudited)
    Quoted Prices inActive Markets
    
    
    Significant Other
    
    
    Significantfor Identical
    
    
    Observable Inputs
    
    
    Unobservable9/30/2010
    
    
    Assets (Level 1)
    
    
    (Level 2)
    
    
    Inputs (Level 3)AssetsFutures
    
    $
    1,627,084
    
    
    $
    1,627,084
    
    
    $
    
    
    
    $
    Forwards
    
    
    933,457
    
    
    
    225,114
    
    
    
    708,343
    
    
    
    Options purchased
    
    
    29,687
    
    
    
    
    
    
    
    29,687
    
    
    
    Total assets
    
    
    2,590,228
    
    
    
    1,852,198
    
    
    
    738,030
    
    
    
    LiabilitiesOptions premiums received
    
    $
    30,396
    
    
    $
    
    
    
    $
    30,396
    
    
    $
    Total
liabilities
    
    
    30,396
    
    
    
    
    
    
    
    30,396
    
    
    
    Total fair value
    
    $
    2,559,832
    
    
    $
    1,852,198
    
    
    $
    707,634
    
    
    $
    
 Quoted Prices inActive Markets
    
    
    Significant Other
    
    
    Significantfor Identical
    
    
    Observable Inputs
    
    
    Unobservable12/31/2009
    
    

Assets (Level 1)
    
    
    (Level 2)
    
    

Inputs (Level 3)AssetsForwards
    
    $
    176,877
    
    
    $
    176,877
    
    
    $
    
    
    
    $
    Options
purchased
    
    
    94,039
    
    
    
    
    
    
    
    94,039
    
    
    
    Total assets
    
    
    270,916
    
    
    
    176,877
    
    
    
    94,039
    
    
    
    LiabilitiesFutures
    
    $
    366,940
    
    
    $
    366,940
    
    
    $
    
    
    
    $
    Forwards
    
    
    608,468
    
    
    
    
    
    
    
    608,468
    
    
    
    Options
premiums received
    
    
    35,406
    
    
    
    
    
    
    
    35,406
    
    
    
    Total
liabilities
    
    
    1,010,814
    
    
    
    366,940
    
    
    
    643,874
    
    
    
    Total fair value
    
    $
    (739,898
    )
    
    $
    (190,063
    )
    
    $
    (549,835
    )
    
    $
    
  17




---



##### 



Potomac Futures Fund L.P.
    Notes to Financial Statements
September 30, 2010
    (Unaudited)
  5.
    Financial
    Instrument Risks:             18




---



##### 



Potomac Futures Fund L.P.
    Notes to Financial Statements
September 30, 2010
    (Unaudited)
  6.  Critical
    Accounting Policies
  Use of Estimates
  Statement of Cash Flows
  Partnerships Investments
 Partnerships and the Masters Fair Value Measurements.
   19




---



##### 



Potomac Futures Fund L.P.
    Notes to Financial Statements
September 30, 2010
    (Unaudited)
  Futures Contracts
  Forward Foreign Currency Contracts
    London Metals Exchange Forward Contracts
 Options.
  Income Taxes
   20




---



##### 



Potomac Futures Fund L.P.
    Notes to Financial Statements
September 30, 2010
    (Unaudited)
    Subsequent Events.
  Recent Accounting Pronouncements.
  No. 2010-09 2010-09),
  Net Income (Loss) per Redeemable Unit and General Partner Unit Equivalent.
  7. Subsequent Event:
   21




---



##### 



Item 2.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations.  Liquidity
    and Capital Resources
            Critical
    Accounting Policies
  Partnerships Investments
 Partnerships and the Masters Fair Value Measurements.
    22




---



##### 



Futures Contracts
  Forward Foreign Currency Contracts
    London Metals Exchange Forward Contracts
 Options.
  23




---



##### 



Results
    of Operations
          24




---



##### 



30-day 3-month and/or 90-day
        25




---



##### 



Item 3.
    Quantitative
    and Qualitative Disclosures about Market Risk            one-day
 26




---



##### 



Form 10-K
   September 30, 2010

    (Unaudited)
  Three Months Ended September 30, 2010% of Total
    
    
    High
    
    
    Low
    
    
    AverageMarket Sector
    
    Value at Risk
    
    
    Capitalization
    
    
    Value at Risk
    
    
    Value at Risk
    
    
    Value at Risk*Currencies
    
    $
    1,887,608
    
    
    
    4.39
    %
    
    $
    3,076,532
    
    
    $
    1,369,669
    
    
    $
    1,986,603Energy
    
    
    151,050
    
    
    
    0.35
    %
    
    
    479,500
    
    
    
    64,850
    
    
    
    296,119Grains
    
    
    232,000
    
    
    
    0.54
    %
    
    
    335,050
    
    
    
    30,989
    
    
    
    162,978Interest Rates U.S.
    
    
    444,800
    
    
    
    1.03
    %
    
    
    793,900
    
    
    
    349,600
    
    
    
    481,150Interest Rates Non-U.S.
    
    
    717,633
    
    
    
    1.67
    %
    
    
    1,860,915
    
    
    
    569,403
    
    
    
    978,320Livestock
    
    
    14,750
    
    
    
    0.03
    %
    
    
    24,600
    
    
    
    5,275
    
    
    
    11,667Metals
    
    
    898,350
    
    
    
    2.09
    %
    
    
    901,371
    
    
    
    321,332
    
    
    
    553,126Softs
    
    
    246,400
    
    
    
    0.57
    %
    
    
    317,000
    
    
    
    125,100
    
    
    
    204,551Indices
    
    
    1,245,739
    
    
    
    2.89
    %
    
    
    1,557,772
    
    
    
    450,112
    
    
    
    1,043,389Total
    
    $
    5,838,330
    
    
    
    13.56
    %
  *
    Average of Month-end Values at Risk
 27




---



##### 



Item 4.
    Controls
    and Procedures      Rules 13a-15(e) 15d-15(e)
  internal control over financial
    reporting
  
    pertain to the maintenance of records that in reasonable detail
    accurately and fairly reflect the transactions and dispositions
    of the assets of the Partnership;
    provide reasonable assurance that (i) transactions are
    recorded as necessary to permit preparation of financial
    statements in accordance with GAAP and (ii) the Partnerships
    receipts are handled and expenditures are made only pursuant to
    authorizations of the General Partner; and
    provide reasonable assurance regarding prevention or timely
    detection of unauthorized acquisition, use or disposition of the
    Partnerships assets that could have a material effect on
    the financial statements.   28




---



##### 



PART II.
    OTHER INFORMATION  Item 1.
    Legal
    Proceedings  Form 10-K
 29




---



##### 



Item 1A.  Risk     Factors
    Item 2.
    Unregistered
    Sales of Equity Securities and Use of Proceeds          (d) Maximum Number(or Approximate(c) Total Number



Dollar Value) of(a) Total







of Redeemable Units



Redeemable Units thatNumber of



(b) Average



Purchased as Part



May Yet BeRedeemable



Price Paid per



of Publicly Announced



Purchased Under thePeriod


Units Purchased*



Redeemable Unit**



Plans or Programs



Plans or ProgramsJuly 1, 2010 -
    July 31, 2010



3,508.4505



$
1,241.25




N/A




N/AAugust 1, 2010 -
August 31, 2010



722.7308



$
1,302.40




N/A




N/ASeptember 1, 2010 -
September 30, 2010



2,019.2422



$
1,361.11




N/A




N/A6,250.4235



$
1,287.04   * Generally, limited partners
    are permitted to redeem their Redeemable Units as of the end of
    each month on 10 days notice to the General Partner.
    Under certain circumstances, the General Partner can compel
    redemption but to date the General Partner has not exercised
    this right. Purchases of Redeemable Units by the Partnership
    reflected in the chart above were made in the ordinary course of
    the Partnerships business in connection with effecting
    redemptions for limited partners.
  ** Redemptions of Redeemable
    Units are effected as of the last day of each month at the net
    asset value per Redeemable Unit as of that day.
  Item 3.
    Defaults
    Upon Senior Securities  None  Item 4.
    [Removed and Reserved]  Item 5.
    Other
Information  None. 30




---



##### 



Item 6.
    Exhibits 3.1
    
    Certificate of Limited Partnership as filed in the office of the Secretary of State of the
State of New York, dated March 13, 1997 (filed as Exhibit 3.1 to the General Form for
Registration of Securities on Form 10 filed on April 30, 2004 and incorporated herein by
reference).(a)
    
    Certificate of Amendment of the Certificate of Limited Partnership as filed in the office
of the Secretary of State of the State of New York, dated February 26, 1999 (filed as
Exhibit 3.4 to the General Form for Registration of Securities on Form 10 filed on April 30,
2004 and incorporated herein by reference).(b)
    
    Certificate of Change of the Certificate of Limited Partnership as filed in the office of
the Secretary of State of the State of New York, effective January 31, 2000 (filed as
Exhibit 3.3 to the General Form for Registration of Securities on Form 10 filed on April 30,
2004 and incorporated herein by reference).(c)
    
    Certificate of Amendment of the Certificate of Limited Partnership as filed in the office
of the Secretary of State of the State of New York, dated April 1, 2001 (filed as Exhibit
3.2 to the General Form for Registration of Securities on Form 10 filed on April 30, 2004
and incorporated herein by reference).(d)
    
    Certificate of Amendment of the Certificate of Limited Partnership as filed in the office
of the Secretary of State of the State of New York, dated April 21, 2003 (filed as Exhibit
3.5 to the General Form for Registration of Securities on Form 10 filed on April 30, 2004
and incorporated herein by reference).(e)
    
    Certificate of Amendment of the Certificate of Limited Partnership as filed in the office
of the Secretary of State of the State of
New York, dated September 21, 2005 (filed as Exhibit 3.1(e) to the Form 10-Q
filed on November 16, 2009 and incorporated
herein by reference).(f)
    
    Certificate of Amendment of the Certificate of Limited Partnership as filed in the office
of the Secretary of State of the State of New York, dated September 19, 2008 (filed as Exhibit 3.1(f) to the Form 10-Q filed on November 16, 2009 and incorporated
herein by reference).(g)
    
    Certificate of Amendment of the Certificate of Limited Partnership as filed in the office
of the Secretary of State of the State of New York, dated September 28, 2009 (filed as
Exhibit 99.1 to the Form 8-K filed on September 30, 2009 and incorporated herein by
reference).(h)
    
    Certificate of Amendment of the Certificate of Limited Partnership
as filed in the office of the Secretary of State of the State of New York,
dated June 29, 2010 (filed as Exhibit 3.1(h) to the Form 8-K filed on
June 30, 2010 and incorporated herein by reference).3.2
    
    Third Amended and Restated Limited Partnership Agreement, dated February 22, 2010 (filed as
Exhibit 3.1 to the Current Report on Form 8-K filed on February 25, 2010 and incorporated herein by reference).10.1
    
    Form of Subscription Agreement (filed as Exhibit 10.1 to the Form 10-Q filed on November 16, 2009 and incorporated
herein by reference).10.2
    
    Second Amended and Restated Customer Agreement between the Partnership and Salomon Smith
Barney Inc., dated April 1, 2001 (filed as Exhibit 10.2 to the General Form for Registration
of Securities on Form 10 filed on April 30, 2004 and incorporated herein by reference).10.3
    
    Second Amended and Restated Agency Agreement among the Partnership,
the General Partner, CGM and Morgan Stanley Smith Barney LLC, dated July 29, 2010
(filed as Exhibit 10.3 to the Form 8-K filed on August 3, 2010 and incorporated herein by reference).10.4
    
    Joinder Agreement among the Partnership, the General Partner, CGM
and Morgan Stanley Smith Barney LLC, dated June 1, 2009 (filed as Exhibit 10 to
the Form 10-Q filed on August 14, 2009 and incorporated herein by reference).10.5
    
    Escrow Agreement among the Partnership, Smith Barney Futures Management Inc., Smith Barney
Inc. and European American Bank, dated April 15, 1997 (filed as Exhibit 10.5 to the Form 10-Q filed on November 16, 2009 and incorporated
herein by reference).10.6
    
    Management Agreement among the Partnership, Smith Barney Futures Management Inc. and Campbell
& Company, Inc., dated April 1, 1997 (filed as Exhibit 10.1 to the General Form for
Registration of Securities on Form 10 filed on April 30, 2004 and incorporated herein by
reference).(a)
    
    First Amendment to the Management Agreement among the Partnership, Smith Barney Futures
Management Inc., Campbell & Company, Inc. and SFG Global Investments, Inc., dated March 1,
1999 (filed as Exhibit 10.1(a) to the General Form for Registration of Securities on Form 10
filed on April 30, 2004 and incorporated herein by reference).(b)
    
    Second Amendment to the Management Agreement among the Partnership, Smith Barney Futures
Management LLC and Campbell & Company, Inc., dated April 1, 2001 (filed as Exhibit 10.1(b)
to the General Form for Registration of Securities on Form 10 filed on April 30, 2004 and
incorporated herein by reference).(c)
    
    Letter extending Management Agreement between the General Partner and Campbell & Company,
Inc. for 2009, dated June 9, 2009 (filed as Exhibit 10.6(c) to the Form 10-K filed on March
31, 2010 and incorporated herein by reference).31.1
    
    Rule 13a-14(a)/15d-14(a) Certification (Certification of President and Director).31.2
    
    Rule 13a-14(a)/15d-14(a) Certification (Certification of Chief Financial Officer, Secretary and Director).32.1
    
    Section 1350 Certification (Certification of President and Director).32.2
    
    Section 1350 Certification (Certification of Chief Financial Officer, Secretary and Director). 31




---



##### 



SIGNATURES
    POTOMAC FUTURES FUND L.P.By:

Ceres Managed Futures LLC(General
    Partner)By:

/s/  Walter DavisWalter Davis
    President and DirectorDate: November 12, 2010By:

/s/  Jennifer
    MagroJennifer
    Magro
    Chief Financial Officer, Secretary and Director
(Principal Accounting Officer)Date: November 12, 2010  32