Word of the Day
Futures Terms that begin "M"
Macro
Macro involves investing by making leveraged bets on anticipated price movements of stock markets, interest rates, foreign exchange and physical commodities. Macro managers employ a "top down" global approach, and may invest in any markets using any instruments to participate in expected market movements. These movements may result from forecasted shifts in world economies, political fortunes or global supply and demand for resources, both physical and financial. Exchange traded and over-the-counter derivatives are often used to magnify these price movements.
Managed Futures
The segment of the alternative investment industry which actively trades and manages futures instruments. The advisers that focus their asset management efforts on futures are known as CTAs (Commodity trading Advisors) They invest on both the long and short side of the market and usually employ quantitative or technical analysis and systematic investment processes.
Manipulation
Any planned operation, transaction, or practice that causes or maintains an artificial price. Specific types include corners and squeezes as well as unusually large purchases or sales of a commodity or security in a short period of time in order to distort prices, and putting out false information in order to distort prices.
Margin
The amount of capital that has to be deposited as collateral in order to gain full exposure to an asset.
Margin Call
A request by your broker to make an additional margin payment, because of adverse price movement on a position.
Mark-to-Market
To debit or credit on a daily basis a margin account based on the close of that day's trading session. In this way, buyers and sellers are protected against the possibility of contract default.
Market Neutral
Denotes an approach to investment where the emphasis is on the value of securities relative to each other and the use of arbitrage techniques, rather than market direction forecasting. By emphasizing the relative value of securities and the exploitation of pricing anomalies between related securities, practitioners of market neutral approaches aim to generate profits regardless of the overall direction of broad market prices. Market neutrality is generally achieved by offsetting or hedging long and short positions or maintaining balanced exposure in the market. The term market neutral can be applied with some justification to the majority of alternative investment styles because of their ability to capitalize both on upward or downward price moves or to profit in a wide range of market environments.
Market Timing
Market Timing involves allocating assets among investments by switching into investments that appear to be beginning an uptrend, and switching out of investments that appear to be starting a downtrend. This primarily consists of switching between mutual funds and money market funds. Typically, trend following indicators are used to determine the direction of a fund and to identify buy and sell signals. In an up move "buy signal", money is transferred from a money market fund into a mutual fund in an attempt to capture a capital gain. In a down move "sell signal", the assets in the mutual fund are sold and moved back into the money market fund for safe keeping until the next up move. The goal is to avoid being invested in mutual funds during a market decline.
Market-on-Close
An order to buy or sell at the end of the trading session at a price within the closing range of prices.
Merger Arbitrage
Merger Arbitrage, sometimes called Risk Arbitrage, involves investment in event-driven situations such as leveraged buyouts, mergers and hostile takeovers. Normally, the stock of an acquisition target appreciates while the acquiring company's stock decreases in value. These strategies generate returns by purchasing the stock of the company being acquired, and in some instances, selling short the stock of the acquiring company. Managers may employ the use of equity options as a low-risk alternative to the outright purchase or sale of common stock. Most Merger Arbitrage funds hedge against market risk by purchasing S&P put options or put option spreads.
Minimum Price Fluctuation (Minimum Tick)
Smallest increment of price movement possible in trading a given contract.
Momentum
The speed of price change over a period of time. Momentum based investment styles, notably trend following approaches, aim to capitalize on the acceleration in directional price movements, be they upward or downward.
Monte Carlo Simulation
A mathematical technique used to model the price characteristics of an investment structure based on random simulations of the underlying assets or variables that affect the price of that investment. In the context of the modeling carried out at Man, the analysis involves constructing multiple NAV paths for a product, net of all appropriate fees and interest, using random samples of gross monthly returns. The price characteristics that can be modeled using this powerful technique are known as 'path-dependent' characteristics, such as risk, return, and drawdown's, which depend on NAV movements over the life of an investment structure.
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