Within this glossary, you will find an expansive list of Managed Futures terms and Futures Trading terminology. Bookmark this section as a quick reference for definitions of trading terms as you browse the Internet and our site for more information on Managed Futures, Pooled Investments and CTA Programs.
The rate of return annualized for a specific period.
The standard deviation of an investment annualized for monthly returns.
The standard deviation of an investment annualized for quarterly returns.
The simultaneous purchase and sale of similar commodities in different markets to profit from price discrepancies
AP Participants within the futures market who are involved in the solicitation or facilitation of transacting customer orders, maintaining discretionary accounts, or true participation in the futures market.
A fund's average monthly cumulative gains and losses incurred over a given number of periods.
The cumulative average of a fund’s rate of return over a given number of periods.
The volatility of past returns relative to a benchmark that measures a fund’s level of risk.
A standard that serves as the basis for comparing fund performance.
A firm or individual that executes futures and options orders on behalf of other parties.
A fee charged by a broker to a customer for executing a transaction. Also referred to as brokerage fee.
CFTC The federal regulatory agency established in 1974 that administers the Commodity Exchange Act. The CFTC monitors the futures and options on futures markets in the United States. The commission is independent of all cabinet departments, and comprises five commissioners who were appointed by the President and subject to Senate confirmation.
An enterprise in which funds contributed by a number of persons are combined for the purpose of trading futures or options contracts.
CPO An individual or organization that operates or solicits funds for a commodity pool. CPOs are generally required to be registered with the CFTC.
CTA A person who advises others as to the value of or advisability of buying or selling futures contracts or options or trades on the customer’s behalf. A CTA trades other people’s money, and generally must be registered with the CFTC.
The average yearly return, including compounding, that produces a fund’s total return over a given time period.
The average monthly return, including compounding, that produces a fund’s total return over a given time period.
A trading strategy that attempts to profit by small gains through a series of trades against the current market trend. Many counter-trend trading strategies utilize momentum indicators when determining trading opportunities.
Funds required of both buyers and sellers of futures contracts and sellers of options contracts to ensure fulfillment of contract obligations.
A statement that must be provided by a Commodity Trading Advisor or Commodity Pool Operator to prospective customers describing trading strategy, fees, performance, etc.
An account over which any individual or organization, other than the person in whose name the account is carried, exercises trading authority or control. Also referred to as a controlled or managed account.
A measure of downside risk based on returns that fall below a specified minimum threshold.
The peak-to-trough decline during a given time period.
An emerging CTA is one whose track record is less than five years and has less than $100 million dollars in assets under management.
An established CTA is one whose track record exceeds five years in duration and has more than $100 million dollars in assets under management.
Forex or FX A shortened term for foreign exchange futures, also known as FX or currency futures. Forex futures are exchange-traded contracts to buy or sell a specified amount of a currency on a set future date, at a specified price.
An over-the-counter market where buyers and sellers conduct foreign exchange business by telephone and other means of communication. Also referred to as foreign exchange market.
A method of anticipating future price movement using supply and demand information.
Standardized contracts covering the sale of commodities for future delivery on a futures exchange.
FCM An individual or organization that solicits or accepts orders to buy or sell futures contracts or commodity options, and accepts money or other assets from customers in connection with such orders. An FCM must be registered with the CFTC.
A legally binding agreement to buy or sell a commodity or financial instrument at a later date. Futures contracts are standardized according to the quality, quantity, and delivery time and location for each commodity.
An order that, at the request of the customer, is credited to a brokerage house that has not performed the execution service.
Commodity Trading Advisors that utilize a global macro approach to managing assets primarily focus on the overall economic and political views of various countries, along with other macroeconomic principles to determine trading opportunities.
The practice of offsetting the price risk inherent in any cash market position by taking an equal but opposite position in the futures market.
The date on which a fund begins operating.
The amount a futures market participant must deposit into a margin account at the time an order is placed to buy or sell a futures contract. Also called Initial Performance Bond. See Margin.
A time period for holding trades three months to a year in duration until liquidation.
An intermediate investment time horizon is a period of three to ten years.
IB Firm or an individual that solicits and accepts futures orders from customers but does not accept money, securities, or property from the customer. An IB must be registered with the CFTC.
A long term investment time horizon is a period longer than 10 years.
A time period for holding trades a year or more in duration until liquidation.
A sum usually smaller than, but part of, the original margin (security deposit) that must be maintained on deposit at all times. If your account falls below the maintenance margin requirement, you will receive a margin call. If you wish to continue to hold the position, you will be required to restore your account to the full initial margin level (not to the maintenance margin level). See Margin.
See Discretionary Account.
Represents an asset class composed of commodity trading advisors who manage client assets on a discretionary basis, using global futures markets as an investment medium
A cash amount of funds that a customer must deposit with the broker for each contract as a sign of his good faith in fulfilling the contract terms.
A call from a broker or firm to a customer, to bring margin deposits up to a required minimum level. Exchange rules state that margin calls must be satisfied by bringing your account equity back to the Initial Margin level. Failure to meet a margin call immediately may result in some or all of the trader’s positions being liquidated by the firm without prior notification.
The minimum amount of capital required to invest in a fund.
See Uncovered Option.
NFA Authorized by Congress in 1974 and designated by the CFTC in 1982 as a "registered futures association," NFA is the industrywide self-regulatory organization of the futures industry. The primary responsibilities of the NFA are to enforce ethical standards and customer protection rules, screen futures professionals for membership, audit and monitor professionals for financial and general compliance rules, and provide for arbitration of futures-related disputes.
A method of public auction for making bids and offers in the trading pits of futures exchanges.
The person who sells an option in return for a premium, and is obligated to perform when the holder exercises his right under the option contract. Also referred to as the writer.
The fund’s gains or losses over a specific period expressed as a percentage of the initial investment.
See Commodity Pool.
A full-featured downloadable platform provided by RJO Futures to give online traders fast and reliable access to the markets. Clients can use the full range of RJO Vantage features to create a complete and customizable trading platform.
Represents the number of trades (in and out) that a CTA program trades on an annual basis, based on a $1 million account.
The measure of a fund’s risk compensation, or the ratio of a fund’s excess return to its standard deviation.
A time period for holding trades seconds to a three month duration until liquidation.
A short term investment time horizon is a period of less than 3 years.
The measure of a fund’s value based on expected volatility, or the fund’s excess return over its lower partial standard deviation.
Commodity Trading Advisors that trade using a systematic approach define trade goals, risk controls, and rules to find and execute trades in a methodical fashion. Many systematic CTAs employ computer models based primarily on technical analysis of market data or fundamental economic data, with minimal manager intervention.
An approach to analysis of futures markets that examines patterns of price change, rates of change, and changes in volume of trading, open interest and other statistical indicators. See Charting.
The total percentage return of an investment over a specified period, calculated by expressing the difference between the investment’s initial price and final price as a percentage of the initial price.
The general direction, either upward or downward, in which prices have been moving.
The length of time in which trades are held until offset.
The actual rate of return over a given evaluation period.
A short call or put option position that is not covered by the purchase or sale of the underlying futures contract or physical commodity. Also referred to as a Naked Option.
The performance evaluation measure of a fund’s total return gained with compounding; an index that tracks the monthly performance of a hypothetical $1,000 investment.
The amount of risk associated with changes in a fund's value.
The number of transactions in a futures or options on futures contract made during a specified period of time.
The largest peak-to-trough decline during a specific time period.
© 2018 R.J. OASIS
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