Uncovered Options Trading System
Rally is an upward movement of prices.
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.
Range is the difference between the high and low price of a commodity, futures, or option contract during a given period (trading session, week, month, year, etc).
Ratio Hedge is the number of options compared to the number of futures contracts bought or sold in order to establish a hedge that is neutral or delta neutral.
Ratio Spread is a trading strategy which is applied to both puts and calls, and which involves buying or selling options at one strike price in greater number than those bought or sold at another strike price. Ratio spreads are typically designed to be delta neutral. Back spreads and front spreads are types of ratio spreads.
Reaction is a downward price movement after a price advance.
Recovery is an upward price movement after a decline.
Reference Asset is an asset, such as a corporate or sovereign debt instrument, that underlies a credit derivative.
Regular Warehouse is a processing plant or warehouse that satisfies exchange requirements for financing, facilities, capacity, and location and has been approved as acceptable for delivery of commodities against futures contracts. See Licensed Warehouse.
Reparations is the term that is used in conjunction with the Commodity Futures Trading Commission's (CFTC's) customer claims procedure to recover civil damages.
Replicating Portfolio (sometimes referred to as a synthetic asset) is a portfolio of assets for which changes in value match those of a target asset. For example, a portfolio replicating a standard option can be constructed with certain amounts of the asset underlying the option and bonds.
Repo or Repurchase Agreement is a transaction in which one party sells a security to another party while agreeing to repurchase it from the counterparty at some date in the future, at an agreed price. Repos allow traders to short-sell securities and allow the owners of securities to earn added income by lending the securities they own. Through this operation the counterparty is effectively a borrower of funds to finance further. The rate of interest used is known as the repo rate.
Reportable Positions is the number of open contracts specified by the Commodity Futures Trading Commission (CFTC) when a firm or individual must begin reporting total positions by delivery month to the authorized exchange and/or the CFTC.
Reporting Level is the size of positions set by the exchanges and/or the Commodity Futures Trading Commission (CFTC) at or above which commodity traders or brokers who carry these accounts must make daily reports about the size of the position by commodity, by delivery month, and whether the position is controlled by a commercial or non-commercial trader.
In technical analysis, Resistance is a price area where new selling will emerge to dampen a continued rise. Support, in opposite to resistance is the price area where buying overcome selling and price starts to recover after being in decline.
Resting Order is a limit order to buy at a price below or to sell at a price above the prevailing market that is being held by a floor broker. Such orders may either be day orders or open orders.
Retail Customer is a customer that does not qualify as an eligible contract participant under Section 1a(12) of the Commodity Exchange Act, 7 USC 1a(12). An individual with total assets that do not exceed $10 million, or $5 million if the individual is entering into an agreement, contract, or transaction to manage risk, would be considered a retail customer.
In specific circumstances, some exchanges permit holders of futures contracts who have received a delivery notice through the clearing organization to sell a futures contract and return the notice to the clearing organization to be reissued to another long; others permit transfer of notices to another buyer. In either case, the trader is said to have retendered the notice.
Retracement is a reversal within a major price trend.
Reversal is a change of direction in prices.
With regard to options, Reverse Conversion or Reversal is a position created by buying a call option, selling a put option, and selling the underlying instrument (for example, a futures contract).
Reverse Crush Spread is a trading strategy that involves sale of soybean futures and the simultaneous purchase of soybean oil and meal futures.
Riding the Yield Curve is a trading in an interest rate futures contract according to the expectations of change in the yield curve.
Ring is a circular area on the trading floor of an exchange where traders and brokers stand while executing futures trades. Some exchanges use pits rather than rings.
Risk-Reward Ratio is the relationship between the probability of loss and profit. Risk-Reward Ratio is often used as a basis for trade selection or comparison.
Roll-Over is a trading procedure involving the shift of one month of a straddle into another future month while holding the other contract month. The shift can take place in either the long or short straddle month. The "Roll-Over" term also applies to lifting a near futures position and re-establishing it in a more deferred delivery month.
Round Lot is a quantity of a commodity equal in size to the corresponding futures contract for the commodity.
Round Turn is a completed futures transaction involving both a purchase and a liquidating sale, or a sale followed by a covering purchase.
Rules are the principles, standards and requirements for governing an exchange. In some exchanges, rules are adopted by a vote of the membership, while in others, they can be imposed by the governing board.
Runners are messengers or clerks who deliver orders received by phone clerks to brokers for execution in the pit.
Sample Grade is usually the lowest quality of a commodity, too low to be acceptable for delivery in satisfaction of futures contracts.
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.