AIMA

The Alternative Investment Management Association

Alternative Investment Management Association Representing the global hedge fund industry

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Glossary

AIMA's Glossary has been developed for all those with an interest in the alternative investment industry - from the beginner to the advanced practitioner.

You will find a considerable overlap of content with the traditional fund management industry - the instruments used, the service providers employed, etc.  However, the hedge fund industry is individual in the way in which it uses these resources.

For reasons of law and accuracy, this is not a wiki.  It is a work-in-progress, however, and we invite you to submit new items for inclusion below (including the proposed definition).

  • We express our sincere thanks to Stanley Marchon, Vincent Kuhn, Nicolas Watin-Augouard, Stephen Foster and Sunil Gopalan for the creation of this resource. 
  • Special thanks are also extended to Anne Taulbut and Jennifer Nye of Katten Muchin Rosenman Cornish for the extensive legal review.
 
broker association

Two or more persons with exchange trading privileges who (1) share responsibility for executing customer orders; (2) have access to each other's unfilled customer orders as a result of common employment or other types of relationships; or (3) share profits or losses associated with their brokerage or trading activity.

bull

An investor who expects securities prices to rise - the opposite to a bear.

bull market

A market in which share prices are rising and the volume and value of securities being traded are high.

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.

buy (or sell) on close

To buy (or sell) at the end of the trading session within the closing price range.

buy (or sell) on opening

To buy (or sell) at the beginning of a trading session within the open price range.

buyer

A market participant who takes a long futures position or buys an option. An option buyer is also called a Taker, Holder or Owner.

buying hedge

Hedging transaction in which futures contracts are bought to protect against possible increases in the cost of commodities. Also known as Long hedge. See Hedging.

call

(1) An option contract giving the buyer the right but not the obligation to purchase a commodity, security. futures contract or other asset or to enter into a long futures position; (2) a period at the opening and the close of some futures markets in which the price for each futures contract is established by auction; or (3) the requirement that a financial instrument be returned to the issuer prior to maturity, with principal and accrued interest paid off upon return.

call option

The right but not the obligation to purchase an agreed amount of a commodity ,security, futures contract or other asset at a predetermined price within a specified period of time. See American option and European option.

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