Options Trading Glossary

Description: Options Glossary, Naked Option, Naked Position,Naked Uncovered option,Narrow-Based

Naked Option

An option written (sold) without an underlying hedge position.

Naked Position

A securities position not hedged from market risk.

Naked Uncovered option

A short option position that is not fully collateralized if notification of assignment is received. A short call position is uncovered if the writer does not have a long stock or long call position. A short put position is uncovered if the writer is not short stock or long another put.

Narrow-Based

Generally referring to an index, it indicates that the index is composed of only a few stocks, generally in a specific industry group.

Narrowing the Spread

The closing spread between the bid and asked prices of a security as a result of bidding and offering.

NASD (National Association of Securities Dealers)

The National Association of Securities Dealers is an industry association of broker/dealers in the over-the-counter securities business. The NASD is a self-regulatory body and administers the NASDAQ stock market.

NASDAQ

National Association of Securities Dealers Automated Quotations system - a computerized system providing brokers and dealers with price quotations for securities traded over-the-counter as well as for many New York Stock Exchange listed securities.

Near-the-Money

An option with a strike price close to the current price of the underlying tradable.

Net Change

The daily change from time frame to time frame. For example, the change from the close of yesterday to the close of today.

Net Profit

The overall profit of a trade.

Neutral

An adjective describing the belief that a stock or the market in general will neither rise nor decline significantly.

Neutral strategy

Describing an opinion that is neither bearish nor bullish. Neutral option strategies are generally designed to perform best if there is little or no net change in the price of the underlying stock or index. This is an option strategy (or stock and option position) expected to benefit from a neutral market outcome.

New York Stock Exchange (NYSE)

The largest stock exchange in the United States.

Ninety-ten (90/10) Strategy

A conservative option strategy in which an investor buys Treasury bills (or other liquid assets) with 90 percent of his or her funds, and buys call options (or put options or a mixture of both) with the balance. The proportions of this strategy are subject to change based on prevailing interest rates.

Non-Equity Option

An option whose underlying entity is not common stock; typically refers to options on physical commodities and index options. At the same time non-equity options include options on futures, foreign currencies, Treasury security yields, etc.

Not-Held Order

A type of order which releases normal obligations implied by the other terms of the order. For example, a limit order designated as 'not-held' allows discretion to the floor trader in filling the order when the market trades at the limit price of the order. In this case, there is no obligation to provide the customer with an execution if the market trades through the limit price on the order.

Note

A short-term debt security, usually maturing in five years or less.

Notice Perioddd

The time during which the buyer of a futures contract can be called upon to accept delivery. Typically, the 3 to 6 weeks preceding the expiration of the contract.

NYSE

New York Stock Exchange.

Odds

Odds is the predicted profits divided by the predicted losses obtained by projecting the stock price randomly into the future using the Statistical Volatility (SV). The prediction stops at the expiration of the earlist expiring option leg.

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