If you are a CTA, what option you use to calculate ROR? According to page 9 of âDisclosure Documents A Guide for CPOs and CTAsâ http://www.nfa.futures.org/COMPLIANCE/publications/dd2001/DD2005.pdf There are 4 options to use. Which option you use? And why? 1. ROR is defined as net performance for a period divided by the BNAV for that period. Using this method, however, can sometimes result in distortions in computed ROR under certain circumstances. For example, distortions can result when additions and/or withdrawals are large and are made early in the reporting period. In those instances when using the above method would result in RORs that are inaccurate the following alternate methods are acceptable provided that the resultant RORs are not misleading. 2. Time-weighting. In the time-weighting method, the BNAV is adjusted upward by time-weighted additions and downward by time-weighted withdrawals. For additions, the time-weighting represents the percentage of the month for which funds were available, while for withdrawals the time-weighting represents the percentage of the month for which funds were unavailable. 3. Compounded ROR. In this method, the ROR is calculated for each sub period between additions/withdrawals (as if each such sub period were itself an entire month). As the name implies, the compounded ROR for the entire month would be equal to the compounded return for the sub period. 4. Only Accounts Traded. The only accounts traded (OAT) method calculates the monthly ROR in the conventional manner of dividing the net performance by the BNAV, except that accounts that traded for only part of the month or witnessed âmaterialâ additions/withdrawals during the months would be excluded from the calculations. By excluding these accounts, the calculated figure will reflect the ROR that would have been realized by an investor with an account that was active at the start of the month and held until the end of the month without any additions or withdrawals. In effect, by removing the influence of intra month additions/withdrawals, the OAT method yields an undistorted actual return figure. Each of the above methods of computing ROR is acceptable provided certain conditions are met and the resultant RORs are not misleading. QUESTION: 1. Is option 1 a validate option? 2. Does any one use option 1? 3. Which option is simplest to calculate?