This glossary focuses on phrases and terminology commonly used in the world of alternative investments. It is not meant to be an all-encompassing investment dictionary, but rather a tool to enhance understanding of alternative investments.

- A -

The apportionment of premiums and discounts on forward exchange transactions that relate directly to deposit swap (Interest Arbitrage) deals , over the period of each deal.

The return on an investment's annualized return minus the benchmark's annualized return.

The physical or cash commodity, as distinguished from a commodity futures contract. Also see Cash and Spot Commodity.

A method of paying interest where the interest is added onto the principal at maturity or interest payment dates.

Official action normally by either change in the internal economic policies to correct a payment imbalance or in the official currency rate or. Adjustment - Official action normally by either change in the internal economic policies to correct a payment imbalance or in the official currency rate.

A group whose functions include approval of valuations of investments and dealing with conflicts of interest. They may also approve distributions, review audits and consider requested exemptions from partnership covenants.

See Exchange For Physicals.

Also called netting. Refers to a portfolio perspective when calculating the carried interest between general partners and limited partners.

The principle under which all futures positions owned or controlled by one trader (or group of traders acting in concert) are combined to determine reporting status and compliance with speculative limits.

Aggressive growth invests in equities expected to enjoy higher than normal growth in EPS. Typically
have high P/E ratios, low or no dividends, often smaller capitalization. Often concentrates in sectors like technology, banking or biotechnology. Hedges by shorting equities where an earnings disappointment is expected or by shorting stock indexes. Normally has a long bias.

This is a benchmark which measures the performance of issues which have defaulted. The index includes " all public, non-convertible corporate debt issues that have either filed for bankruptcy or defaulted on a scheduled interest or principal payment". A weighted average of market value is used to calculate the yields and returns. The weighted average is calculated by each issue being weighted according to the product of its face amount outstanding and its price (as a percentage of par) as of the beginning of the measurement period.

A currency is said to 'appreciate' when it strengthens in price in response to market demand.

Any bank, stockyard, mill, storehouse, plant, elevator or other depository that is authorized by an exchange for the delivery of commodities tendered on futures contracts.

The price at which the market is prepared to sell a specific Currency in a Foreign Exchange Contract or Cross Currency Contract. At this price, the trader can buy the base currency. In the quotation, it is shown on the right side of the quotation. For example, in the quote USD/CHF 1.4527/32, the ask price
is 1.4532; meaning you can buy one US dollar for 1.4532 Swiss francs.

A trust established offshore to protect the settlor's assets against those who may make claims against them, including creditors, former spouses and dependents on death. Some offshore jurisdictions provide protection from creditor claims against persons who have guaranteed bank loans.

To make an option seller perform his obligation to assume a short futures position (as a seller of a call option) or a long futures position (as a seller of a put option).

One which allows the holder to convey his rights to a third party. Exchange-traded contracts are not assignable.

An instruction given to a dealer to buy or sell at the best rate that can be obtained.

An order to deal at a specific rate or better.

When an option's exercise price is the same as the current trading price of the underlying commodity,
the option is at-the-money.

This is the arithmetic mean of the periods with a gain. It is calculated by summing the returns for the
gain periods (where return > 0) and dividing by the number of gain periods.

The arithmetic mean of the periods with a loss.

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Those futures delivery months with expiration or delivery dates furthest into the future; futures
delivery months other than the spot or nearby delivery month.

Under the theory of normal backwardation, futures prices will tend to rise over the life of a contract because hedgers tend to be short the futures market. Hedgers tend to be short the futures contract
as insurance against their cash position. The hedgers will pay the speculators a return to hold long positions in order to offset their risk. This is known as normal backwardation. A market is considered to
be in backwardation when the cash price exceeds the future price or a nearby futures price is greater than a more distant futures price. If the reverse is true and hedgers are long futures contracts, the futures contract price would decline over its life. This situation is known as contango. For there to be normal backwardation, speculators must be long futures contracts. Only in this manner will the futures price continue to rise as more speculators need to be compensated for their risk exposure. Conversely, for there to be contango, speculators must be net short futures contracts. Only in this manner will the futures price continue to decline over its life for the speculator to be rewarded for his exposed risk.

The value of a country's exports minus its imports.

A type of chart which consists of four significant points: the high and the low prices, which form the vertical bar, the opening price, which is marked with a little horizontal line to the left of the bar, and the closing price, which is marked with a little horizontal line of the right of the bar.

Also known as dry, formal, naked, passive or simple trusts. The trustees have no duties other than to convey the trust properly to the beneficiaries when called upon to do so.

The first currency in a Currency Pair. It shows how much the base currency is worth as measured
against the second currency. For example, if the USD/CHF rate equals 1.6215 then one USD is worth CHF 1.6215 In the FX markets, the US Dollar is normally considered the 'base' currency for quotes, meaning that quotes are expressed as a unit of $1 USD per the other currency quoted in the pair. The primary exceptions to this rule are the British Pound, the Euro and the Australian Dollar.

The difference between the spot or cash price of a commodity and the price of the nearest futures contract for the same or a related commodity. Basis is usually computed in relation to the futures contract next to expire and may reflect different time periods, product forms, qualities, or locations.

The grade of a commodity used as the standard or par grade of a futures contract.

The risk associated with an unexpected widening or narrowing of basis between the time a hedge position is established and the time that it is lifted.

A market distinguished by declining prices.

A strategy employed when an investor expects a decline in a commodity price but at the same time
seeks to limit the potential loss if this expectation is not realized. This spread requires the simultaneous purchase and sale of options of the same class and expiration date but different strike prices. For example, if call options are spread, the purchased option must have a higher exercise price than option that is sold.

The bid is the the price at which the market is prepared to buy a specific Currency in a Foreign Exchange Contract or Cross Currency Contract. At this price, the trader can sell the base currency. It is shown on the left side of the quotation. For example, in the quote USD/CHF 1.4527/32, the bid price is 1.4527; meaning you can sell one US dollar for 1.4527 Swiss francs.

The difference between the bid and offer price. Big Figure Quote - Dealer expression referring to the first few digits of an exchange rate. These digits are often omitted in dealer quotes.. For example, a USD/JPY rate might be 117.30/117.35, but would be quoted verbally without the first three digits i.e. "30/35".

Term for reserving funds by one bank for the benefit of another bank. Blocking of funds is a commonly used banking procedure to ensure that the same funds are not used twice. Often more beneficial to an investor than a bank guarantee.

In a professional trading environment, a 'book' is the summary of a trader's or desk's total positions.

A forward pricing sales arrangement in which the cash price is determined either by the buyer or seller within a specified time. At that time, the previously-agreed basis is applied to the then-current futures quotation.

An option position in which the holder establishes a long call and a short put at one strike price and a short call and a long put at another strike price, all of which are in the same contract month in the same commodity.

An agreement that established fixed foreign exchange rates for major currencies, provided for central bank intervention in the currency markets, and pegged the price of gold at US $35 per ounce. The agreement lasted until 1971, when President Nixon overturned the Bretton Woods agreement and established a floating exchange rate for the major currencies.

An individual or firm that acts as an intermediary, putting together buyers and sellers for a fee or commission. In contrast, a 'dealer' commits capital and takes one side of a position, hoping to earn a spread (profit) by closing out the position in a subsequent trade with another party.

Directly or indirectly taking the opposite side of a customer's order into a broker's own account or into
an account in which a broker has an interest, without open and competitive execution of the order on
an exchange.

A market distinguished by rising prices.

A strategy used when an investor expects that the price of a commodity will go up but at the same
seeks to limit the potential loss should this judgement be in error. This strategy involves the
simultaneous purchase and the sale of options of the same class and expiration date but different strike prices. For example, if call options are spread, the purchased option must have a lower exercise or
strike price than the sold option.

Germany's Central Bank.

A three-legged spread in futures or options. In the option spread, the options have the same expiration date but differ in strike prices. For example, a butterfly spread in soybean call options might consist of two short calls at a $6.00 strike price, one long call at $6.50 strike price, and one long call at a $5.50 strike price.

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Trader jargon referring to the Sterling/US Dollar exchange rate. So called because the rate was
originally transmitted via a transatlantic cable beginning in the mid 1800's.

The simultaneous sale and purchase of either calls or puts with the same strike price but different expiration months. See Interdelivery Spread and Horizontal Spread.

An option contract that give the holder the right (but not the obligation) to purchase a specified number of shares of the underlying stock at the given strike price, on or before the expiration date of the contract.

Used to measure return relative to downside risk. Defined as the Compound Annualized Return over the last 3 years divided by the Maximum Drawdown (absolute value) over the last 3 years.

A chart that indicates the trading range for the day as well as the opening and closing price. If the open price is higher than the close price, the rectangle between the open and close price is shaded. If the close price is higher than the open price, that area of the chart is not shaded.

An option-like contract for which the buyer pays a fee or premium, to obtain protection against a rise in
a particular interest rate above a certain level. For example, an interest rate cap may cover a specified principal amount of a loan over a designated time period such as a calendar quarter. If the covered interest rate rises above the rate ceiling, the seller of the rate cap pays the purchaser an amount of money equal to the average rate differential times the principal amount times one quarter.

Effecting commodity or security transactions shortly prior to an option's expiration date depressing or preventing a rise in the price of the commodity or security so that previously written call options will expire worthless and the premium the writer received will be protected.

Many issuers have more than one class of share. The prices of each of these shares trade in ranges relative to each other but often move out of line. Other shares may have an equivalent vehicle that trades in a different market (e.g. European equities and their American Depository Receipt counterparts). The strategy profits from the disparity in prices between these shares in the different markets.

The general partner's share of the profits generated from a partnership. Typically general partners receive 20% of the profits and the limited partners receive 80%.

The cost of storing a physical commodity, such a grain or metal, over a period of time. The carrying charge includes insurance, storage and interest on the invested funds as well as other incidental costs. In interest rate futures markets, it refers to the differential between the yield on a cash instrument and the cost of funds necessary to buy the instrument. Also referred to as Cost of Carry.

Cost of storing a physical commodity or holding a financial instrument over a period of time. Includes insurance, storage and interest on the invested funds as well as other incidental costs. It is a carrying charge market when there are higher futures prices for each successive contract maturity. If the carrying charge is adequate to reimburse the holder, it is called a "full charge". Also see Negative Carry, Positive Carry and Contango.

Grain and oilseed commodities not consumed during the marketing year and remaining in storage at
year's end. These stocks are "carried over" into the next marketing year and added to the stocks produced during that crop year.

The physical or actual commodity as distinguished from the futures contract. Sometimes called Spot Commodity or Actuals.

The market in the actual financial instrument on which a futures or options contract is based.

Transactions generally involving index-based futures contracts that are settled in cash based on the actual value of the index on the last trading day, in contrast to those that specify the delivery of a commodity or financial instrument.

A government or quasi-governmental organization that manages a country's monetary policy. For example, the US central bank is the Federal Reserve, and the German central bank is the Bundesbank.

A clearing member of both the Mid-America Commodity Exchange (MCE) and another futures exchange who, for a fee, will assume the opposite side of a transaction on the MCE by taking a spread position between the MCE and another futures exchange which trades an identical, but larger, contract.
Through this service, the changer provides liquidity for the MCE and an economical mechanism for arbitrage between the two markets.

An individual who uses charts and graphs and interprets historical data to find trends and predict future movements. Also referred to as Technical Trader.

A method to determine which particular cash debt instrument is most profitable to deliver against a futures contract.

A partnership provision that allows for a review of the total profit distribution from the partnership at
the end of the term. The clawback is a mechanism to recapture overpayments to the general partners
if they received more than their stated carried interest. The clawback provision requires return of any excess to the limited partners.

Funds that are freely available, sent in to settle a trade.

The process of settling a trade.

An agency or separate corporation of a futures exchange that is responsible for settling trading accounts, collecting and maintaining margin monies, regulating delivery and reporting trade data.
The clearinghouse becomes the buyer to each seller (and the seller to each buyer) and assumes
responsibility for protecting buyers and sellers from financial loss by assuring performance on each contract.

A type of fund that issues a set number of shares and typically trades on a stock exchange. Unlike more traditional open-end funds, transactions in shares of closed-end funds are based on their market price
as determined by the forces of supply and demand in the marketplace. The market price of a closed-end fund may be above (at a premium) or below (at a discount) the value of its underlying portfolio (or NAV).

Exposures in Foreign Currencies that no longer exist. The process to close a position is to sell or buy a certain amount of currency to offset an equal amount of the open position. This will 'square' the postion.

A transaction in which at some point prior to expiration, the option holder makes an offsetting sale of
an identical option, or the option writer makes an offsetting purchase of an identical option. A closing transaction in an option reduces or cancels out an investor's previous position as the holder or the
writer of that option.

Direct investment by a limited partner in a company in which the fund is invested.

The simultaneous purchase of a cap and the sale of a floor with the aim of maintaining interest rates within a defined range. The premium income from the sale of the floor reduces or offsets the cost of buying the cap.

Something given to secure a loan or as a guarantee of performance.

The strategy is to invest in securitized bank loans to earn a positive carry over the funding rate. Fees
are earned for arranging loans and deal syndication as well.

A transaction fee charged by a broker.

The obligation of a limited partner to contribute an agreed amount of capital to a fund.

An individual or organization that operates or solicits funds for a commodity pool.

A person who, for compensation or profit, directly or indirectly advises others as to the value of the advisability of buying or selling futures contracts or commodity options. Advising indirectly includes exercising trading authority over a customer's account as well as providing recommendations through written publications or other media.

A document exchanged by counterparts to a transaction that states the terms of said transaction.

A market situation in which shorts attempting to cover their positions are unable to find an adequate supply of contracts provided by longs willing to liquidate or by new sellers willing to enter the market, except at sharply higher prices.

The tendency of an economic crisis to spread from one market to another. In 1997, political instability
in Indonesia caused high volatility in their domestic currency, the Rupiah. From there, the contagion spread to other Asian emerging currencies, and then to Latin America, and is now referred to as the 'Asian Contagion'.

Market situation in which prices in succeeding delivery months are progressively higher than in the nearest delivery month; the opposite of "backwardation".

The standard unit of trading.

A condition in a financial agreement that enables the investor to take back his funds if the result represented is not achieved.

Those grades of a commodity which have been officially approved by an exchange as deliverable in settlement of a futures contract.

The tendency for prices of physicals and futures to approach one another, usually during the delivery month. Also called a "narrowing of the basis".

When trading options on futures contracts, a position created by selling a call option, buying a put option, and buying the underlying futures contract, where the options have the same strike price and
the same expiration.

Convertible arbitrage looks for mispricing between a convertible security and the underlying common stock. Convertible securities have a theoretical value that is based on a number of factors, including the value of the underlying stock. When the trading price of a convertible moves away from its theoretical value, an arbitrage opportunity exists.

This strategy typically involves purchasing undervalued convertible securities (bonds, preferred shares and warrants) and hedging the underlying equity risk by selling short an appropriate amount of common shares of the issuer. Properly executed, this strategy creates a net position which is substantially
neutral to the movements in the underlying equity and has an attractive yield. Interest income on the convertible bond plus the rebate on the short stock typically provide a positive carry or static return. There are further opportunities for gains independent of market direction as the relative value relationship between the long bond and short stock changes.

A bond is said to have positive convexity if its price rises more rapidly than an index in a bull market, when interest rates decline, and falls more slowly in a bear market, when interest rates rise. Convexity explains the difference between price change estimated by a bond's duration (see Duration) and its actual price change when market yields change. Thus it is a measure of the shape of the price/yield
curve relationship. Negative convexity simply means behaviour is worse than expected by a simple duration calculation.

A statistical measure of the degree to which the movements of two variables are related. For example,
a hedge fund's returns may have positive or negative correlation with the market.

The second listed Currency in a Currency Pair.

One of the participants in a financial transaction.

Risk associated with a cross-border transaction, including but not limited to legal and political conditions.

A measure of the degree to which returns on two risky assets move in tandem. A positive covariance means that asset returns move together. A negative covariance means they vary inversely.

In energy futures, the simultaneous purchase of crude oil futures and the sale of petroleum product futures to establish a refining margin.

Value amount representing the credit risk exposure in off-balance sheet transactions. In the case of derivatives, credit equivalent value represents the potential cost at current market prices of replacing the contract's cash flow in the case of default by the counter-party.

The risk that a counter party to a transaction will fail to perform according to the terms and conditions
of the contract, thus causing the holder of the claim to suffer a loss.

The time span from harvest to harvest for agricultural commodities. The crop marketing year varies slightly with each ag commodity, but it tends to begin at harvest and end before the next year's
harvest, e.g. the marketing year for soybeans begins September 1 and end August 31. The futures contract month of November represents the first major new-crop marketing month, and the contract month of July represents the last major old-crop marketing month for soybeans.

A foreign exchange transaction in which one foreign currency is traded against a second foreign currency. For example; EUR/GBP

Hedging a cash commodity using a different but related futures contract when there is no futures contract for the cash commodity being hedged and the cash and futures markets follow similar price trends (e.g. using soybean meal futures to hedge fish meal).

In the soybean futures market, the simultaneous purchase of soybean futures and the sale of soybean meal and soybean oil futures to establish a processing margin.

A transaction involving the exchange of cash flows and principal in one currency for those in another
with an agreement to reverse the principal swap at a future date.

AUD - Australian Dollar
CAD - Canadian Dollar
EUR - Euro
JPY - Japanese Yen
GBP - British Pound
CHF - Swiss Franc

Any form of money issued by a government or central bank and used as legal tender and a basis for trade.

The probability of an adverse change in exchange rates.

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Speculators who take positions in commodities which are then liquidated prior to the close of the same trading day.

An individual or firm that acts as a principal or counterpart to a transaction. Principals take one side of a position, hoping to earn a spread (profit) by closing out the position in a subsequent trade with another party. In contrast, a broker is an individual or firm that acts as an intermediary, putting together buyers and sellers for a fee or commission.

A negative balance of trade or payments.

An FX trade where both sides make and take actual delivery of the currencies traded.

A fall in the value of a currency due to market forces.

A contract that changes in value in relation to the price movements of a related or underlying security, future or other physical instrument. An Option is the most common derivative instrument.

The deliberate downward adjustment of a currency's price, normally by official announcement.

The short biased managers invest mostly in short positions in equities and equity derivative products.
To be classified as a short biased manager, the short bias of the manager's portfolio must be constantly greater than zero. To effect the short sale, the manager borrows the stock from a counter party (often its prime broker) and sells it in the market. The proceeds from the sale are kept by the broker as collateral. An additional margin of typically 5% to 50% must be deposited in the form of liquid securities. The margin is adjusted daily. Leverage is created because margin is below 100%. Short selling can be time consuming and expensive. The manager needs very efficient stock borrowing and lending facilities. Because of this, short positions are sometimes implemented by selling forward; selling stock index
futures or buying put options and put warrants on single stocks or stock indices.

The standard grades of commodities or instruments listed in the rules of the exchanges that must be
met when delivering cash commodities against futures contracts. Grades are often accompanied by a schedule of discounts and premiums allowable for delivery of commodities of lesser or greater quality than the standard called for by the exchange. Also referred to as contract grades.

Stocks of commodities located in exchange approved storage, for which receipts may be used in making delivery on futures contracts. In the cotton trade, the term refers to cotton certified for delivery.

The third day in the delivery process at the Chicago Board of Trade , when the buyer's clearing firm presents the delivery notice with a certified check for the amount due at the office of the seller's
clearing firm.

A specific month in which delivery may take place under the terms of a futures contract. Also referred
to as contract month.

The nearest traded month. In plural form, one of the nearer trading months.

The transfer of the cash commodity from the seller of a futures contract. Each futures exchange has specific procedures for delivery of a cash commodity. Some futures contracts, such as stock index contracts, are cash settled.

An option margining system used by some exchange members and/or floor traders which equates the changes in option premiums with the changes in the price of the underlying futures contract to
determine risk factors on which to base the margin requirements.

A measure of how much an option premium charges, given a unit change in the underlying futures price. Delta of ten is interpreted as the probability that the option will be in-the-money by expiration.

An instrument whose value, usefulness, and marketability is dependent upon or derives from an underlying asset. Classes of derivatives include futures contracts, options, currency forward contracts, swaps, and options on futures.

These are funds that invest in markets typically dominated by derivative instruments. For example, commodity funds typically invest in futures contracts and currency funds typically invest in forward contracts and swap agreements.

A spread between two call options or two put options with different strike prices and different
expiration dates.

Price differences between classes, grades and delivery locations of various stocks of the same commodity.

Buys equity, debt, or trade claims at deep discounts of companies in or facing bankruptcy or reorganization. Profits from the market's lack of understanding of the true value of the deeply
discounted securities and because the majority of investors cannot own below investment grade securities.

The strategy involves investing in the illiquid debt or equity of firms in or near bankruptcy to profit from potential recovery. Portfolios are generally unlevered. Equity risk may be hedged by shorting the stock or using index derivatives.

The term "distribution" related to how both the general and limited partners receive profits as the investments are liquidated.

As used by the CFTC, it implies a situation where a trader holds a long position in the futures market in excess of the speculative limit as an offset to a fixed price sale even though the trader has an ample supply of the commodity on hand to fill all sales commitments.

The measurement of the variability of returns below a minimum acceptable return specified by the investor. Downside risk is an alternative measurement that challenges standard deviation - the most widely accepted calculation of risk. Unlike standard deviation, downside risk calculations do not include returns above the minimum acceptable return target, because they pose no threat to the investor's ability to meet their investment objectives.

A drawdown is any losing period during an investment time frame. It is calculated by taking the peak to valley loss relative to the peak for a stated time period. The figure is expressed as a percentage. For example, fund ABC had a return of 10% in March and a return of - 5% in July. The drawdown for this period (March to July) would be 15%.

Dual trading occurs when (1) a floor broker executes customer orders and, on the same day, trades
for his own account or an account in which he has an interest; or (2) a Futures Commission Merchant
carries customer accounts and also trades, or permits its employees to trade, in accounts in which it
has a proprietary interest, also on the same day.

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A government issued statistic that indicates current economic growth and stability. Common indicators include employment rates, Gross Domestic Product (GDP), inflation, retail sales, etc.

An order to buy or sell at a specified price. This order remains open until the end of the trading day
which is typically 5PM ET.

The principal goal of the EMU is to establish a single European currency called the Euro, which will officially replace the national currencies of the member EU countries in 2002. On Janaury1, 1999 the transitional phase to introduce the Euro began. The Euro now exists as a banking currency and paper financial transactions and foreign exchange are made in Euros. This transition period will last for three years, at which time Euro notes an coins will enter circulation. On July 1,2002, only Euros will be legal tender for EMU participants, the national currencies of the member countries will cease to exist. The current members of the EMU are Germany, France, Belgium, Luxembourg, Austria, Finland, Ireland,
the Netherlands, Italy, Spain and Portugal.

The currency of the European Monetary Union (EMU). A replacement for the European Currency Unit (ECU).

The Central Bank for the new European Monetary Union.

The strategy attempts to exploit informational inefficiencies in emerging markets. Portfolios will generally take long positions in the securities of firms operating in emerging markets. Shorts may not be available
in many emerging markets so the manager may have to short ADR's or related securities.

Invests in equity or debt of emerging (less mature) markets which tend to have higher inflation and volatile growth. Short selling is not permitted in many emerging markets, and, therefore, effective hedging is often not available, although Brady bonds can be partially hedged via U.S. Treasury futures and currency markets.

The market price at which the quantity supplied of a commodity equals the quantity demanded.

Strategies that exploit mispricings of equity and equity derivative securities.

A strategy under which the manager attempts to remove all directional market risk by being equally long and short. Such equality would cover at least dollar neutrality and extend in varying degrees to style, industry, and capitalization. The goal of the equity market neutral manager is to focus on bottom-up security selection and eliminate the impact of market movements on portfolio return. Besides security selection the manager controls the amount of cash and total investment exposure.

An investment strategy seeking to identify and exploit pricing inefficiencies that have been caused by some sort of corporate event, such as a merger, spin-off, distressed situation, or recapitalization.
Event-Driven strategies involve attempting to predict the outcome of a particular transaction as well as the optimal time at which to commit capital to it. The uncertainty about the outcome of these events creates investment opportunities for managers who can correctly anticipate their outcomes.

A transaction generally used by two hedgers who want to exchange futures for cash positions. Also referred to as against actuals or versus cash.

A transaction in which the buyer of a cash commodity transfers to the seller a corresponding amount of long futures contracts, or receives from the seller a corresponding amount of short futures, at a price difference mutually agreed upon. In this way the opposite hedges in futures of both parties are closed out simultaneously. Also called EFP (Exchange for Physical), AA (Against Actuals) or Ex-Pit transactions.

This is the means by which a private equity investor realizes upon the original investment. Typical mechanisms include an IPO, company buyback, acquisition by a third party, merger with another company, secondary sales in which the original investor sells to other investors or a write-off of an unsuccessful investment.

Any of a wide variety of options with non-standard payout structures, including Asian options and Lookback options. Exotic options are mostly traded in the over-the-counter market.

An expiration cycle relates to the dates on which options on a particular underlying security expire.
A given option, other than LEAPS, will be assigned to one of three cycles, the January cycle, the February cycle or the March cycle.

Options on futures generally expire on a specific date during the month preceding the futures contract delivery month. For example, an option on a March futures contract expires in February but is referred to as a March option because its exercise would result in a March futures contract position.

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