Uncovered Options Trading System
Large Order Execution (LOX) Procedures are rules in place at the Chicago Mercantile Exchange that authorize a member firm that receives a large order from an initiating party to solicit counterparty interest off the exchange floor prior to open execution of the order in the pit and that provide for special surveillance procedures. The parties determine a maximum quantity and an "intended execution price." Subsequently, the initiating party's order quantity is exposed to the pit; any bids (or offers) up to and including those at the intended execution price are hit (acceptable). The unexecuted balance is then crossed with the contraside trader found using the LOX procedures.
A large trader is one who holds or controls a position in any one future or in any one option expiration series of a commodity on any one exchange equaling or exceeding the exchange or CFTC-specified reporting level.
Last Notice Day is the final day on which notices of intent to deliver on futures contracts may be issued.
Last Trading Day is the last day on which trading may occur in a given futures or option. On that day trading ceases for the maturing (current) delivery month.
Leaps stands for "Long-term Equity Anticipation Securities" and they are long-dated, exchange-traded options.
Leverage is the ability to control large dollar amounts of a commodity with a comparatively small amount of capital.
LIBOR stands for the London Interbank Offered Rate. The rate of interest at which banks borrow funds from other banks, in marketable size, in the London interbank market. LIBOR rates are disseminated by the British Bankers Association. Some interest rate futures contracts, including Eurodollar futures, are cash settled based on LIBOR.
Licensed Warehouse is a warehouse approved by an exchange from which a commodity may be delivered on a futures contract.
Life of Contract is a period between the beginning of trading in a particular futures contract and the expiration of trading. In some cases, this phrase denotes the period already passed in which trading has already occurred. For example, "The life-of-contract high so far is $2.50." Same as life of delivery or life of the future.
Limit is the maximum price advance (Limit Up) or decline (Limit Down) from the previous day's settlement price permitted during one trading session, as fixed by the rules of an exchange. In some futures contracts, the limit may be expanded or removed during a trading session a specified period of time after the contract is locked limit.
Limit Only is the definite price stated by a customer to a broker restricting the execution of an order to buy for not more than, or to sell for not less than, the stated price.
Limit Order is an order in which the customer specifies a minimum sale price or maximum purchase price, as contrasted with a market order, which implies that the order should be filled as soon as possible at the market price.
Liquid Market is a market in which selling and buying can be accomplished with minimal effect on price.
Liquidate (also referred to as Offset) stands for selling a previously purchased futures or options contract or to buy back a previously sold futures or options position.
Liquidation (also called Offset) stands for closing out of a long position. The term is sometimes used to denote closing out a short position (cover short position), but this is more often referred to as covering.
Liquidity (Liquid Market) is a characteristic of a security or commodity market with enough units outstanding and enough buyers and sellers to allow large transactions without a substantial change in price.
Local is a member of an exchange who trades for his own account. Traditionally Local trades on an exchange floor, and Local's activities provide market liquidity.
Location is a Delivery Point for a futures contract.
Locked Limit (also called Limit Move) is a price that has advanced or declined the permissible limit during one trading session, as fixed by the rules of an exchange.
Locked-In is a hedged position that cannot be lifted without offsetting both sides of the hedge (spread). See Hedging. Locked-In also refers to being caught in a limit price move.
London Gold Market refers to the dealers who set (fix) the gold price in London.
Long Futures trader is a trader who has bought futures contracts or options on futures contracts or owns a cash commodity. Long position (long trading) is opposite to Short position (Short trading).
"Long the Basis" is a person or firm that has bought the spot commodity and hedged with a sale of futures is said to be long the basis.
"Lookalike Option" is an over-the-counter option that is cash settled based on the settlement price of a similar exchange-traded futures contract on a specified trading day.
"Lookalike Swap" is an over-the-counter swap that is cash settled based on the settlement price of a similar exchange-traded futures contract on a specified trading day.
Lookback Option is an exotic option whose payoff depends on the minimum or maximum price of the underlying asset during some portion of the life of the option.
Lot is a unit of trading. There are several Lot types: Even Lot, Job Lot, and Round Lot.
Low is the lowest price of the day for a particular futures or options on futures contract.
Macro Fund is a hedge fund that specializes in strategies designed to profit from expected macroeconomic events.
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.