Naked

When an option writer writes a call or put without owning the underlying asset.

National Futures Association (NFA)

A “registered futures association” authorized by the CFTC in 1982 that requires membership for FCMs, their agents and associates, CTAs, and CPOs. This is a self-regulatory group for the futures industry similar to the National Association of Securities Dealers, Inc. in the securities industry.

Nearby

The futures contract month with the earliest delivery period.

Net position

The difference between total open long and open short positions in any one or all combined futures contract months held by an individual.

Neutral calendar spread

See Calendar spread.

Nominal price (or nominal quotation)

The price quotation calculated for futures or options for a period during which no actual trading occurred. These quotations are usually calculated by averaging the bid and asked prices.

Normal market

The deferred months’ prices for futures contracts are normally higher than the nearby months’ to reflect the costs of carrying a contract from now until the distant delivery date. Thus, a “normal market,” for non-interest rate futures contracts, exists when the distant months are at a premium to the nearby months. For interest rate futures, just the opposite is true. The yield curve dictates that a “normal market” for interest rate futures occurs when the nearby months are at a premium to the distant months.

Notice of intention to deliver

During the delivery month for a futures contract, the seller initiates the delivery process by submitting a “notice of intention to deliver” to the clearinghouse, which, in turn, notifies the oldest outstanding long of the seller’s intentions. If the long does not offset his position, he will be called upon to accept delivery of the goods.