CFTC Glossary

A Guide to the Language of the Futures Industry


Naked Option: The sale of a call or put option without holding an equal and opposite position in the underlying instrument. Also referred to as an uncovered option, naked call, or naked put.

Narrow-Based Security Index: In general, the Commodity Exchange Act defines a narrow-based security index as an index of securities that meets one of the following four requirements (1) it has nine or fewer components; (2) one component comprises more than 30 percent of the index weighting; (3) the five highest weighted components comprise more than 60 percent of the index weighting, or (4) the lowest weighted components comprising in the aggregate 25 percent of the index’s weighting have an aggregate dollar value of average daily volume over a six-month period of less than $50 million ($30 million if there are at least 15 component securities). However, the legal definition in Section 1a(25) of the Commodity Exchange Act, 7 USC 1a(25), contains several exceptions to this provision. See Broad-Based Security Index, Security Future.

National Futures Association (NFA): A self-regulatory organization whose members include futures commission merchants, commodity pool operators, commodity trading advisors, introducing brokers, commodity exchanges, commercial firms, and banks, that is responsible—under CFTC oversight—for certain aspects of the regulation of FCMs, CPOs, CTAs, IBs, and their associated persons, focusing primarily on the qualifications and proficiency, financial condition, retail sales practices, and business conduct of these futures professionals. NFA also performs arbitration and dispute resolution functions for industry participants.

Nearbys: The nearest delivery months of a commodity futures market.

Nearby Delivery Month: The month of the futures contract closest to maturity; the front month or lead month.

Negative Carry: The cost of financing a financial instrument (the short-term rate of interest), when the cost is above the current return of the financial instrument. See Carrying Charges and Positive Carry.

Net  Asset Value (NAV): The value of each unit of participation in a commodity pool.

Net Position: The difference between the open long contracts and the open short contracts held by a trader in any one commodity.

NFA: National Futures Association.

Next Day: A spot contract that provides for delivery of a commodity on the next calendar day or the next business day. Also called day ahead.

NOB (Note Against Bond) Spread: A futures spread trade involving the buying (selling) of a Treasury note futures contract and the selling (buying) of a Treasury bond futures contract.

Non-Member Traders: Speculators and hedgers who trade on the exchange through a member or a person with trading privileges but who do not hold exchange memberships or trading privileges.

Nominal Price (or Nominal Quotation): Computed price quotation on a futures or option contract for a period in which no actual trading took place, usually an average of bid and asked prices or computed using historical or theoretical relationships to more active contracts.

Notice Day: Any day on which notices of intent to deliver on futures contracts may be issued.

Notice of Intent to Deliver: A notice that must be presented by the seller of a futures contract to the clearing organization prior to delivery. The clearing organization then assigns the notice and subsequent delivery instrument to a buyer. Also notice of delivery.

Notional Principal: In an interest rate swap, forward rate agreement, or other derivative instrument, the amount or, in a currency swap, each of the amounts to which interest rates are applied in order to calculate periodic payment obligations. Also called the notional amount, the contract amount, the reference amount, and the currency amount.

NYMEX Lookalike: A lookalike swap or lookalike option that is based on a futures contract traded on the New York Mercantile Exchange (NYMEX).