Financial Dictionary

abcdefghijklmnopqrstuvwxyz

NAIC

Short for National Association of Investors Corporation, NAIC is a Michigan based, non-profit organization, which is dedicated to helping investors create or join investment clubs and providing education among investors on how to maximize their business results.

Naked Call

An option strategy in which the writer sells call option on the market but does not own underlying security of that option. Naked Call is also called uncovered call or short call.

Naked Position

A position of holding securities that are not hedged against market risk which involves greater potential income and potential loss.

Naked Put

A put option in which writer does not have a position in the underlying security. Naked put is also called uncovered put.

Named Peril Insurance Policy

Insurance policy that will cover the losses only for causes that is explicitly listed in the contract. These insurance policies are usually less expensive than broad policies.

Narrow Market

An illiquid market with low spread, high volatility, with just a few bids or asks. It is opposite of liquid market, and very small changes in demand or supply can lead to dramatic oscillations in the prices.

NASD

Short for National Association of Securities Dealers. NASD is the organization that is responsible for regulation of the over-the-counter markets and NASDAQ. NASD can exclude its members of they do not obey the NASD Regulations, but it has no power to take any legal actions against them.

NASDAQ

Electronic trading system that provides ask and bid prices on listed and over-the-counter stocks to brokers and dealers. NASDAQ was established by NASD back in the early 1970s in order to facilitate and improve trading.

NASDAQ Composite Index

A market-value weighted index of stocks listed on NASD. This index is focused on technology stocks, so it is not a good indicator of the market as a whole.

National Futures Associations (NFA)

A non-profit, self-regulatory, independent organization. NFA was found back in 1982 with a purpose of regulating futures market and protect investors from fraudulent activities of immoral traders.

Natural Gas

Natural gas is a major source of power generation, especially for heating and cooling systems in the U.S. Generally, the product is used to either power gas turbines or burned to create steam and power steam turbines instead. The fuel is often preferred to coal or oil since it is far cleaner and produces less […]

Natural Monopoly

A type of monopoly that is established by the market itself. The monopolist does not have the pretensions to be in monopolistic position, but due to market conditions, he is the only producer in the industry. This is often because the industry itself demands high initial fixed costs, where only one producer can survive in […]

Near Money

Refers to high liquidity asset, which can be converted to cash fast and easy.

Nearby Month

When we talk about futures, Nearby month is the closest month that will provide delivery. When we talk about options, Nearby month is the month closest to expiration date. Nearby month is also called nearest month, or spot month.

Negative Carry

A situation in which the cost of borrowing money for financing exceeds the yield earned. Negative Carry leads to loss, except there is tax deduction moment so the overall percentage is positive. This is possible if an investor buys a bond that will provide enough money to repay the debt only if it is tax-free.

Negative Pledge Clause

When we talk about bonds, Negative Pledge Clause is the clause in the contract that obligates the borrower corporation not to pledge any of its assets if that pledging will give the bondholders less security. Negative Pledge Clause is also called “covenant of equal coverage.”

Negative Volume Index

An index that will try to discover what experienced investors will do on the days with low trading volume or volume that has decreased from the previous day

Negative Yield Curve

Negative or Inverted Yield Curve is a situation on the market when long term debt have lower yields than short term debts. This is very rare situation and is known as indicator of economic recession and global interest rate decline.

Negotiable

wWen referring to a security, negotiable means that security is easily transferable from one party to another. Most securities are negotiable. When referring to a price of goods, negotiable means the price is not formally established.

Negotiable Certificate of Deposit (NCD)

NCD is a low risk CD, with high face value, usually $100,000 or more. Because of its high value, these CDs are bought by large institutional investors who want low risk securities, which can be easily sold in highly liquid secondary market.

Nest Egg

refers to an asset that is set aside for future purposes, usually for education, or retirement.

Net Capital Ratio

The relation between indebtedness and liquid assets that every dealer and broker should maintain. Net capital ratios is set at 15:1 at most and is required by SEC. This ratio is required in order to make sure that all dealers and brokers are able to uphold their operations.

Net Change

Represents the difference between security’s trading price for one day and closing price for day before. This is the number that newspapers quote in their daily stock table reports.

Net Domestic Product (NDP)

It is depreciated GDP. The larger the gap between National Domestic Product (NDP) and Gross Domestic Product (GDP), the bigger the superannuation of capital goods in the national economy.