AlphaA risk-adjusted performance measure that represents the average return on a portfolio or investment, above or below that predicted by the capital asset pricing model (CAPM), given the portfolio's or investment's beta and the average market return.
BetaBeta attempts to measure relative risk. A Beta rating above 1.0 indicates greater volatility than the market. A Beta rating below 1.0 indicates lower volatility than the market.
CallsA call option is a contract between a buyer and a seller to purchase a certain stock at a certain price up until a defined expiration date. The buyer of a call has the right, not the obligation, to exercise the call and purchase the stocks.
DeltaA measurement of an option's price sensitivity to a given change in the price of an underlying asset.
DiagonalsA diagonal spread is a modified calendar spread involving different strike prices. It is an options strategy established by simultaneously entering into a long and short position in two options of the same type—two call options or two put options—but with different strike prices and different expiration dates.
Enterprise Value/SalesA valuation metric for equities. EV includes in its calculation the market capitalization of a company but also short-term and long-term debt as well as any cash on the company's balance sheet. This is then divided by the revenue in the most recent year.
Iron CondorsA non-directional option strategy, whereby an option trader combines a Bull Put spread and Bear Call spread to generate profit. In this strategy, there is a high probability of limited gain. An option trader resorts to this strategy if he believes that the market is going to be rangebound.
Market CapitalizationThe measurement of the total dollar market value of all of a company’s outstanding shares.
MSCI All-Country World Index (ACWI)®A free-float weighted equity index. It captures Large and Mid-Capitalization representation across 23 Developed Markets (DM) and 24 Emerging Markets (EM) countries. It is not possible to invest directly in an index.
Options contractAn agreement between two parties to facilitate a potential transaction involving an asset at a preset price and date. Call options can be purchased as a leveraged bet on the appreciation of an asset, while put options are purchased to profit from price declines.
Price/Cash FlowA measure of the market’s expectations of a firm’s future financial health. Because this measure deals with cash flows, the effects of depreciation and other non-cash factors are removed.
Price/BookA ratio used to compare a stock market value to its book value. It is calculated by dividing the current closing price by the latest quarter’s book value per share.
Price/SalesA valuation metric for equities. It is calculated by dividing the company’s market cap by the revenue in the most recent year; or, equivalently, divide the per-share stock price by the per-share revenue.
PutsA put option gives you the right, but not the obligation, to sell a stock at a specific price (known as the strike price) by a specific time – at the option's expiration. For this right, the put buyer pays the seller a sum of money called a premium.
Risk-free RateThe theoretical rate of return of an investment with zero risk. The risk-free rate represents the interest an investor would expect from an absolutely risk-free investment over a specified period of time.
R-SquaredA statistical measure that represents the proportion of the variance for a dependent variable that's explained by an independent variable or variables in a regression model. It can also by computed by squaring the correlation between the strategy and the benchmark.
Return on EquityThe amount of net income returned as a percentage of shareholders‘ equity. Return on equity measures a corporation’s profitability by revealing how much profit a company generates with the money shareholders have invested. Return on Equity = Net Income/Shareholders’ Equity
Return/RiskA measure of risk adjusted performance that is often compared to a benchmark. The formula is the annualized return divided by the annualized standard deviation.
Russell 2000® IndexConsists of the smallest 2,000 companies in a group of 3,000 U.S. companies in the Russell 3000® Index, as ranked by market capitalization. It is not possible to invest directly in an index.
S&P 500Widely regarded as the best single gauge of large cap U.S. equities. The index includes 500 leading companies and captures approximately 80% coverage of available market capitalization. It is not possible to invest directly in an index.
Sharpe RatioThe Sharpe ratio compares the return of an investment with its risk. It's a mathematical expression of the insight that excess returns over a period of time may signify more volatility and risk, rather than investing skill.
Standard DeviationA statistical measurement showing how widely returns varied over a certain period of time. For the characteristics, the period is twelve months. For the chart the period is since inception. When a fund has a high standard deviation, the predicted range of performance implies greater volatility.
Tracking ErrorThe annualized standard deviation of the excess returns of a strategy and its benchmark. It is a measure of how closely a strategy is performing relative to its benchmark.