Uncovered Options Trading System
Commission: Commission is a fee charged by a broker or brokerage house (company) to a customer (trader) for executing a transaction. In the future market commission is
1) The charge made by a futures commission merchant for buying and selling futures contracts;
2) the fee charged by a futures broker for the execution of an order. Note: when capitalized, the word Commission usually refers to the CFTC.
Futures: Futures (also called Futures Contract) is a legally binding agreement to buy or sell a commodity or financial instrument at a later date. Futures contracts are normally standardized according to the quality, quantity, delivery time and location for each commodity, with price as the only variable.
CFTC: CFTC abbreviation stands for the Commodity Futures Trading Commission which is the federal regulatory agency established in 1974 that administers the Commodity Exchange Act. The CFTC monitors the futures and options on futures markets in the United States.
Commodity: A commodity, as defined in the Commodity Exchange Act, includes the agricultural commodities enumerated in Section 1a(4) of the Commodity Exchange Act, 7 USC 1a(4), and all other goods and articles, except onions as provided in Public Law 85-839 (7 USC 13-1), a 1958 law that banned futures trading in onions, and all services, rights, and interests in which contracts for future delivery are presently or in the future dealt in.
Commodity Futures Trading Commission: Commodity Futures Trading Commission (CFTC) is the federal regulatory agency established in 1974 that administers the Commodity Exchange Act. The CFTC monitors the futures and options on futures markets in the United States.
Commodity Option: Commodity option is an option on a commodity or a futures contract.
Contract: Contract is a term of reference describing a unit of trading for a commodity future or option. At the same time contract is an agreement to buy or sell a specified commodity, detailing the amount and grade of the product and the date on which the contract will mature and become deliverable.
Futures Contract: Futures Contract is an agreement to purchase or sell a commodity for delivery in the future: (1) at a price that is determined at initiation of the contract; (2) that obligates each party to the contract to fulfill the contract at the specified price; (3) that is used to assume or shift price risk; and (4) that may be satisfied by delivery or offset.
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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.