36 lines
2.4 KiB
Plaintext
36 lines
2.4 KiB
Plaintext
974 Glossary
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Monte Carlo Simulation: a model designed to simulate a real-world event that can
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not be approximated merely with a mathematical formula. The Monte Carlo sim
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ulation approximates such an event (the movement of the stock market, for exam
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ple) and then it is simulated a great number of times. The net result of all the sim
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ulations is then interpreted as the result, generally expressed as a probability of
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occurrence. For example, a Monte Carlo simulation can be used to determine how
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stocks might behave under certain stock price distributions that are different from
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the lognormal distribution.
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Naked Option: see Uncovered Option.
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Narrow-Based: Generally referring to an index, it indicates that the index is com
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posed of only a few stocks, generally in a specific industry group. Narrow-based
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indices are not subject to favorable treatment for naked option writers. See also
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Broad-Based.
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"Net" Order: see Contingent Order.
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Neutral: describing an opinion that is neither bearish or bullish. Neutral option
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strategies are generally designed to perform best if there is little nor no net change
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in the price of the underlying stock. See also Bearish, Bullish.
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Non-Equity Option: an option whose underlying entity is not common stock; typi
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cally refers to options on physical commodities, but may also be extended to
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include index options.
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"Not Held": see Market Not Held Order.
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Notice Period: the time during which the buyer of a futures contract can be called
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upon to accept delivery. Typically, the 3 to 6 weeks preceding the expiration of the
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contract.
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Open Interest: the net total of outstanding open contracts in a particular option
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series. An opening transaction increases the open interest, while any closing trans
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action reduces the open interest.
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Opening Transaction: a trade that adds to the net position of an investor. An open
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ing buy transaction adds more long securities to the account. An opening sell
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transaction adds more short securities. See also Closing Transaction.
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Option Pricing Curve: a graphical representation of the projected price of an
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option at a fixed point in time. It reflects the amount of time value premium in the
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option for various stock prices, as well. The curve is generated by using a mathe
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matical model. The delta ( or hedge ratio) is the slope of a tangent line to the curve
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at a fixed stock price. See also Delta, Hedge Ratio, Model. |