Word of the Day
Futures Terms that begin "B"
Back End Load
A fee (sales charge or load) that investors pay when selling mutual fund shares within a specified number of years, which usually ranges between five to ten years. The fee amounts to a percentage of the value of the share being sold. The fee percentage is highest in the first year and decreases yearly until the specified holding period ends, at which time it drops to zero.
Also known as a "contingent deferred sales charge or load" The back-end load is a type of sales charge that is used with mutual funds that have share classes, which in this case are identified as Class B shares. Class A shares charge a front-end load that is taken from an investor's initial investment. Class C shares are considered to be a type of level-load fund - no front-end and low back-end loads, but the fund's operating expenses are high. In all cases, the load is paid to a financial intermediary, and is not included in a fund's operating expenses.
In essence, funds with share classes carry sales charges (as opposed to no-load funds). The class you choose is what determines how much and when you pay them. In employer-sponsored retirement plans, the loads are generally waived.
Backwardation
A futures market in which the relationship between two delivery months of the same commodity is abnormal. The opposite of Contango.
Barclay Index
The Barclay CTA Index measures the composite performance of established programs. For purposes of this index, an established trading program is a trading program that has four years or more documented performance history. Once a trading program passes this four-year hurdle, its subsequent performance is included in this unweighted index. The Barclay Index does not represent an actual portfolio, which could be invested in, and therefore the index performance results should be deemed to be hypothetical in nature and of comparative value only.
Barclay Ratio
This ratio was developed by Barclay Trading Group, Ltd. In simplest terms the Barclay Ratio is equal to the trend of the VAMI divided by the standard deviation of the monthly returns. Although similar in certain respects to the Sharpe Ratio, it has a much higher correlation with percentage of profitable 12-month time windows than any other reward/risk ratio.
Basis
The difference between the current cash price of a commodity and the futures price of the same commodity.
Bear Market
A market in which prices are declining.
Benchmark
A standard against which the performance of a security mutual fund or investment manager can be measured. Generally, broad market and market-segment stock and bond indexes are used for this purpose. When evaluating the performance of any investment, it's important to compare it against an appropriate benchmark. In the financial field, there are dozens of indexes that analysts use to gauge the performance of any given investment including the S&P 500, the Dow Jones Industrial Average, the Russell 2000 Index and the Lehman Brothers Aggregate Bond Index.
Beta
A measure of how sensitive an investment portfolio is to market movements. The sign of the beta (+/-) indicates whether, on average, the portfolio's returns move in line with the market (+), or in the opposite direction (-) to the market. If the beta of a portfolio relative to a benchmark index is equal to +1, then the returns on the portfolio follow those of the index. By definition, the beta of that benchmark index is +1. A portfolio with a beta greater than +1 tends to amplify the overall movements of the market, while a portfolio with a beta between 0 and +1 tends to move in the same direction as the market but not to the same extent. A portfolio with a beta of -1 tends to move in the opposite direction to the market.
Bid
An offer to buy a specific quantity of a commodity at a stated price.
Bid-Ask Spread
The difference between the bid price and the ask or offer price.
Bull Market
A market in which prices are rising.
Butterfly Spread
A three-legged option spread in which each leg has the same expiration date but different strike prices. For example, a butterfly spread in soybean call options might consist of one long call at a $5.50 strike price, two short calls at a $6.00 strike price, and one long call at a $6.50 strike price.
Top