Uncovered Options Trading System
Settlement: Settlement is the act of fulfilling the delivery requirements of the futures contract.
Cash Settlement: Cash Settlement is a method of settling certain futures or options contracts whereby the market participants settle in cash (payment of money rather than delivery of the commodity) value of the commodity traded according to a procedure specified in the contract.. Cash Settlement is also called Financial Settlement, especially in energy derivatives.
Derivative: A financial instrument, traded on or off an exchange, the price of which is directly dependent upon the value of one or more underlying securities, equity indices, debt instruments, commodities, other derivative instruments, or any agreed upon pricing index or arrangement. Derivatives involve the trading of rights or obligations based on the underlying product but do not directly transfer that product. Derivatives are generally used to hedge risk or to exchange a floating rate of return for fixed rate of return. Derivatives include futures, options, and swaps. For example, futures contracts are derivatives of the physical contract and options on futures are derivatives of futures contracts.
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Naked options trading is very risky - many people lose money trading them. It is recommended contacting your broker or investment professional to find out about trading risk and margin requirements before getting involved into trading uncovered options.