The Second Leg Down

Glossary

Alpha (α)

This refers to the return that can be delivered by a strategy, in excess of the relevant benchmark.

Alpha

Alpha is the component of return produced by an active manager that is independent of the market or other systematic risk factors.

Backwardation

A futures term structure is in backwardation if long-dated contracts trade at a discount to shorter-dated ones.

Beta (β)

This is the sensitivity of an asset or strategy to changes in the relevant benchmark.

Bleed

The bleed on an option is its time decay, or theta.

Contango

A futures term structure is in contango if long-dated contracts trade at a premium to shorter-dated ones.

CTA

CTAs are Commodity Trading Advisors. They are authorised to trade futures on behalf of clients and regulated by the CFTC in the US.

Delta

Delta is the sensitivity of an option to small changes in the underlying price. In mathematical terms, it is the partial derivative of an option with respect to the underlying price.

Futures term structure

The futures term structure consists of the prices of futures contracts on a single underlying asset, with different times to maturity.

Gamma

Gamma is the sensitivity of an option's delta to small price changes. It measures how quickly the delta can change for small price moves. It is the partial derivative of an option's delta with respect to the underlying price or, equivalently, the second derivative of the option with respect to price.

Greeks

Greeks measure the sensitivity of an option to small ...