An agreement that gives an investor the right (but not the obligation) to purchase a stock, bond, commodity or other investment at a specified price, within a specific time period.
This term refers to the maximum size a fund can grow to before liquidity and other problems arise, as well as the maximum size the fund can reach before closing to new subscriptions.
The practice of closing a fund to new investment when it has reached capacity.
The difference between the buy and sell price of an asset. You could have a capital gain or a capital loss, depending on the price you paid and the price you sold at. For example, a capital gain on stock ABC purchased for $150,000 and sold for $160,000 would be $10,000 and a capital loss on stock XYZ purchased for $100,000 and sold for $95,000 would be $5,000. Capital gains and capital losses receive favourable tax treatment versus income tax gains and losses.
CARR (compound annualized rate of return)
CARR calculates the return of an investment on a per year compounded basis.
An investment strategy involving the borrowing of funds or investments at a relatively low interest rate and the simultaneous purchase of an offsetting position earning a higher yield.
A way of differentiating funds according to their investment objectives and principal investment features. Categorization allows investors to spread their money over a number of funds with a variety of risk and return characteristics.
Pictorial representations of specific stock characteristics such as price and volume that technical analysts use to price equities.
A fund that is closed to new investment but may be available on a secondary market
A type of fund that issues a set number of shares and typically trades on a stock exchange with daily liquidity at market price. Unlike more traditional open-end funds, transactions in shares of closed-end funds are based on their market price as determined by the forces of supply and demand in the marketplace. The market price of a closed-end fund may be above (premium) or below (discount) the value of its underlying portfolio (or net asset value).
A fund that collects investor’s contributions for use in futures and commodity option trading. Commodity pools are similar to mutual funds because by pooling their assets, investors are able to make trades that they could not make on their own.
Compound annual return
Also referred to as the compound annual growth rate (CAGR). Compound return measures the annual growth rate of an investment over a specific period.
A category of stocks that rely heavily on the business cycle and economic conditions. Consumer cyclicals include industries such as automotive, housing, entertainment and retail.
An investment strategy that goes against prevailing market trends by buying assets that are performing poorly and then selling them when they perform well.
Convertible bond arbitrage
This investment strategy involves investing in bonds (or preferred shares) that can be exchanged for the issuing firm's stock at a predetermined price. The manager routinely goes long an undervalued convertible bond while hedging out the market risk by short-selling the common stock.
Generally a bond, preferred stock or warrant that can be exchanged for a set number of common shares of the issuing corporation at a predetermined conversion price.
Measures the degree to which two variables (such as a fund and its benchmark) move together. A correlation coefficient varies from -1.0 to 1.0. -1.0 indicates perfect negative correlation and +1.0 indicates perfect positive correlation.
The risk that each party of a contract faces that the other party will default on their obligations.
CPO (commodity pool operator)
Persons or limited partnerships responsible for investing a commodity pool’s assets in commodity-futures and options positions.
A fund's critical mass is the minimum size needed to accomplish its trading objectives and operate efficiently enough to satisfy the profit needs of the fund company.
CTA (commodities trading advisor)
An individual or a firm, registered with the Commodities Futures Trading Commission, that receives compensation for providing advice on options, futures and the actual trading of managed futures accounts.
The aggregate amount that an investment has gained or lost over time, independent of the period of time. Presented as a percentage, the cumulative return is calculated as follows: (Current price) – (Original price of security) divided by (Original price of security).
A financial institution that has the legal responsibility for a customer’s securities. This implies management as well as safekeeping.