Alpha

Alpha represents the excess return of an investment relative to the return of a benchmark index. In the world of active trading and crypto derivatives, generating positive alpha is the primary objective of many fund managers and quantitative traders.

It indicates that the trader has achieved returns that cannot be explained by market movements alone. Alpha is often attributed to the trader's skill, superior information, or unique trading strategies.

Achieving consistent alpha is difficult and requires a deep understanding of market microstructure and inefficiencies. It is the core metric for evaluating the performance of active strategies compared to passive indexing.

Traders continuously seek new sources of alpha to maintain a competitive advantage. It is a key indicator of value creation in the financial markets.