Uncovered Options Trading System
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.
Fundamental Analysis: Fundamental Analysis is a method of anticipating future price movement using supply and demand information. In opposite to technical analysis it carries studies of basic, underlying factors that will affect the supply and demand of the commodity being traded in futures contracts.
Open: Open is the period at the beginning of the trading session officially designated by the exchange during which all transactions are considered made "at the open."
Open Interest: Open Interest is the total number of futures or options contracts of a given commodity that have not yet been offset by an opposite futures or option transaction nor fulfilled by delivery of the commodity or option exercise. Open Interest is also called open contracts or open commitments. Each open transaction has a buyer and a seller, but for calculation of open interest, only one side of the contract is counted.
Open interest is the number of open contracts of a given option. An open contract is either put or call that is not exercised, closed or expired. Open interest increases when a buyer opens a put or call position and, vise versa, open interest decreases when a buyer sells/closes a put or call position.
Volume and open interest are important indicators in futures markets.
Random Walk: Random Walk is an economic theory that market price movements move randomly. Random Walk theory assumes an efficient market. The theory also assumes that new information comes to the market randomly. Together, the two assumptions imply that market prices move randomly as new information is incorporated into market prices. The Random Walk theory implies that the best predictor of future prices is the current price, and that past prices are not a reliable indicator of future prices. If the random walk theory is correct, technical analysis cannot work.
Volume: Volume is the number of purchases and sales of futures contracts made during a specified period of time, often the total transactions for one trading day.
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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.