|
|
Optionetics Trading Education Center
Naked Option
An option written (sold) without an underlying hedge
position.
Naked Position
A securities position not hedged from market risk. A naked
position occurs when an investor writes a call option or put
option without having a corresponding long position or short
position on the underlying security. The potential rewards
and risks of naked positions are greater than that of covered
positions.
Naked Put
The writer of a put option contract who is not short
the underlying security.
Naked Warrant
Refers to the warrant, rather than the stock to which
the warrant pertains.
Naked Writer
A seller or writer who has sold stock or a stock option
contract for stock that he or she does not own. Also referred
to as a naked writer.
Narrow Market
Refers to a securities or commodities market characterized
by light trading and greater fluctuations in prices relative
to volume than would be the case if trading were active. If
the price of a stock falls more than a point between round
lot trades without apparent explanation other than lack of
interest resulting in too few orders, the market is said to
be narrow.
Narrowing the Spread
The closing spread between the bid and asked prices
of a security as a result of bidding and offering by market
makers and specialists in a security. The bid price is the
most anyone is willing to pay and the asked price is the least
anyone is willing to accept. The difference between these
two prices is the spread.
Narrow Range Day
A trading day with a smaller price range relative
to the previous day's price range.
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.
The system is owned and operated by the NASD in the United
States. Quotations are published in the financial pages of
most newspapers.
National Association of Securities
Dealers, Inc. (NASD)
This is the American self-regulatory organization
of the securities industry responsible for the regulation
of NASDAQ and the over-the-counter markets.
National Bank
Refers to commercial banks in the U.S. whose charter
has been approved by the U.S. Comptroller of the Currency
rather than by a state banking department. National banks
must belong to the Federal Deposit Insurance Corporation and
are required to be members of the Federal Reserve System and
to purchase stock in the Federal Reserve Bank in their district.
NAV Per Share
The value of a mutual fund share, calculated by dividing
the total net asset value of the fund by the number of shares
outstanding.
Nearby
The nearest active trading month of a futures or options
on futures contract.
Near-Month Contract/Far-Month Contract
Contract whose expiration is near/far.
Near-the-Money
An option with a strike price close to the current
price of the underlying tradable.
Neckline
A trendline drawn along the support or resistance
points of various reversal and consolidation pattern (i.e.,
head and shoulder, double and triple top/bottom formations).
Negative Divergence
When two or more averages, indices or indicators fail
to show confirming trends.
Negotiable
A certificate that is transferable by delivery and
which, in the case of a registered certificate, has been duly
endorsed and guaranteed. Transferable from one party to another.
Negotiable Certificate of Deposit
(CD)
An unsecured promissory note issued with a minimum
face value of $100,000. It evidences a time deposit of funds
with the issuing bank, and is guaranteed by the bank.
Negotiated Underwriting
The underwriting of a new securities issue in which
the spread between the purchase price paid to the issuer and
the public offering price is determined through negotiation
rather than through competitive bidding. The spread is the
compensation for the investment bankers participating in the
underwriting (collectively referred to as the syndicate).
The amount of the spread is negotiated between the issuing
company and the managing underwriter with the consent of the
syndicate.
Net Asset Value (NAV)
The value of a fund's investments. For a mutual fund,
the net asset value per share usually represents the fund's
market price, subject to a possible sales or redemption charge.
For a closed end fund, the market price may vary significantly
from the net asset value.
Net Change
The daily change from time frame to time frame. An
example would be the change from the close of yesterday to
the close of today. The difference between the closing price
of a security on the trading day reported and the previous
day's closing price. In over-the-counter transactions, the
term refers to the difference between the closing bids.
Net Domestic Product
A measure of the annual economic output of a nation
adjusted to account for depreciation. It is calculated by
subtracting the amount of depreciation from the gross domestic
product.
Net Earnings
That part of a company's profits remaining after all
expenses and taxes have been paid and out of which dividends
may be paid.
Net Income
The company's total earnings, reflecting revenues
adjusted for costs of doing business, depreciation, interest,
taxes and other expenses.
Net Interest Margin
Net interest income (the difference between interest
income and interest expense), on a taxable-equivalent basis,
as a percentage of average total assets.
Net Present Value (NPV)
Refers to a method used in evaluating investments
in which the net present value (NPV) of all cash outflows
and cash inflows is calculated using a given discount rate,
usually the required rate of return. If the NPV is positive,
the investment is acceptable. In capital budgeting, the discount
rate used is known as the hurdle rate and this rate is usually
equal to the incremental cost of capital.
Net Sales
Gross sales less any applicable excise taxes, returns,
allowances and discounts or rebates given to customers.
Net Worth (Corporate)
The amount by which assets exceed liabilities. Also
referred to as Stockholders' Equity or Net Assets.
Net Worth (Individual)
The total value of all possessions (stocks, bonds,
house, etc.) minus all outstanding debts (mortgage, credit
accounts, etc.) Brokerage houses may require that an individual's
net worth be at or above a certain dollar level in order to
qualify for some high-risk investments.
Netting
The offsetting with a counterparty of financial obligations
or payments one is owed with those one is entitled to receive,
thus reducing the costs arising out of payment settlements.
Netting is also used as a risk management tool to help counterparties
reduce their exposure to credit risk.
Network B
Covers the American Stock Exchange (AMEX) listed securities,
identifies the originating market, and reports on securities
listed on regional stock exchanges.
New Issue
An offering of stocks or bonds sold by a company for
the first time.
New York Stock Exchange (NYSE)
The largest stock exchange in the United States. It
is a corporation, operated by a board of directors, and it
is responsible for setting policy, supervising Exchange and
member activities, listing securities, overseeing the transfer
of members' seats on the Exchange and judging whether an applicant
is qualified to be a specialist.
Noise
Price and volume fluctuations that can confuse interpretation
of market direction.
Noisy Signal
A signal in which the effects of random influences
cannot be dismissed.
No-Load
Without any sales charge.
No Load Mutual Fund
An open-end investment company, shares of which are
sold without a sales charge. There can be other distribution
charges. A true "no load" fund will have neither
a sales charge nor a distribution fee.
Nominal Interest Rate
The stated interest rate, which does not take inflation
into consideration.
Nominal Yield
The interest rate stated on the face of a bond that
represents the percentage of interest to be paid by the issuer
on the face value of the bond. This amount will not change.
Non-cumulative
A preferred dividend that does not accumulate if unpaid
Nonlinear Dynamics Analysis
Analysis of relationships that start from well-defined
outcomes to complex and chaotic results.
Nonlinear Statistics
Statistics theory that attempts to define probability
distribution from disorder to either a more orderly state
or a sharp trend reversal, such as stock market fluctuations.
Non-Seasonal Autocorrelation
Autocorrelation that shows up other than at 12-month
lag intervals.
Non-Trend Day
A narrow range day lacking any discernible movement
in either direction.
No Par Stock
Stock that has no stated value on the certificate
or on the books of the issuing company. Par value has little
meaning in terms of real value.
No Par Value
Common stock that has no stated face value.
Normal Distribution
For the purposes of statistical testing, the simulated
net returns are assumed to be drawn from a particular distribution.
If net returns are drawn from a normal distribution, low and
high returns are equally likely, and the most likely net return
in a quarter is the average net return.
Normal Market Size (NMS)
A share classification system that replaced the October
1986 alpha, beta, gamma, delta system in January 1991. The
NMS system has twelve categories based on the size of transactions
in which market makers are obligated to deal.
Normalized
Adjusting a time series so that the series lies in
a prescribed normal, standard range.
Normal Yield Curve
A chart showing long-term debt instruments having
higher yields than short-term debt instruments.
Normalized Earnings
Earnings, either past or future, that are adjusted
for cyclical ups and downs in the economy. Analysts normalize
earnings by generating a moving average over several years
including up and down cycles. Analysts refer to normalized
earnings when explaining whether a company's current profits
are above or below its long-term trend.
Norton High/Low Indicator
The Norton High/Low indicator uses results from the
Demand Index and the Stochastic study and is designed to pick
tops and bottoms on long-term price charts. Two lines are
generated: the NLP line and the NHP line. The system also
uses level lines at -2 and -3. The NLP line crossing -3 to
the downside is the signal that a new bottom will occur in
4-6 periods, using daily, weekly, or monthly data. Similarly,
the NHP line crossing -3 to the downside indicates a new top
in the same time frame. The indicator tends to be more reliable
using longer-term data (weekly or monthly). When either indicator
drops below the -3 level, a reversal may be imminent. The
reversal (or hook) is the signal to enter the market. For
greater reliability, use the Norton High/Low Indicator together
with other studies for confirmation.
Note
A short-term debt security, usually maturing in five
years or less.
Notice Day
The day that a notice of intent to deliver is issued
to a futures contract holder.
Notis %V
A way to measure volatility is to measure the daily
ranges between the high and the low. Volatility is high when
the daily range is large and low when the daily range is small.
The Notis %V study contains two separate indicators. It divides
market volatility into upward and downward components (UVLT
and DVLT). Both are plotted separately in the same window,
and can be plotted as an oscillator. The upward component
is also compared to the total volatility (UVLT + DVLT) and
expressed as a percentage; thus the name, %V. Volatility can
be a key to options trading. A good sense of market volatility
can help you avoid those frustrating times when the market
moves your way but your option still loses value.
Null Hypothesis
The hypothesis that there is no validity to the specific
claim that 2 variations (treatments) of the same thing can
be distinguished by a specific procedure.
Back to top
|
|
|
|
|
