Word of the DayWelcome to Investmenterms.com, a comprehensive dictionary for commodity futures traders.
Average Annual Return (AAR)
A percentage figure used when reporting the historical return, such as the three-, five- and 10-year average returns of a mutual fund. The average annual return is stated net of a fund's operating expense ratio, which does not include sales charges, if applicable, or portfolio transaction brokerage commissions When you are selecting a mutual fund, the average annual return is a helpful guide for measuring a fund's long-term performance. However, investors should also look at a fund's yearly performance to fully appreciate the consistency of its annual total returns. For example, a five-year average annual return of 10% looks attractive; however, if the yearly returns (those that produced the average annual return) were +40%, +30%, -10%, +5% and -15% (50 / 5 = 10%), the fund's recent performance (past three years) is quite poor.
Initial Deposit/Margin
Funds put up as security for the guarantee of the contract fulfilment at the beginning of a futures or options contract.
Ask
The price level of an offer, as in bid-ask spread.
Pyramiding
The use of profits on existing positions as margin to increase the size of the position, normally in successively smaller increments.
Limit Order
An order in which a customer stipulates the maximum/minimum price acceptable.
Ask
The price level of an offer, as in bid-ask spread.