Naked Option
A CALL OPTION for which the seller does not own the supporting shares, and which he hopes to buy from the market, believing that the price will fall. If it does, he makes a profit on the difference; if it doesn’t, and rises, the seller is caught in a naked position, and must sustain a loss by buying at the higher price. See also SELLING SHORT.
Naked Position
One that is not hedged from market risk. If one writes a call or put option without a corresponding long or short position on the security, one’s potential risk or reward is on the high side, compared to a covered position. See COVERED CALL.
Narrowing the Spread
Reducing the spread between the bid price and the asked price. Let us suppose that a jobber asks Rs 92 for a share and bids Rs 90 for it. His spread is Rs 2. If subsequently he revises his asking price to Rs 91.50 and his bid to Rs 90.50, he had narrowed his spread from RS 2 to Re 1.
National Depository System
A depository is a central holding place, or repository, of financial securities. If transfers shares and bonds electronically, through a computer entry, and eliminates the need of investors to hold securities physically. Investors access the system through DPs, or Depository Participants – banks, brokers, mutual funds, etc. Trading ultimately becomes scripless, as record of ownership, not physical possession, becomes the feature of trading. Transfer of ownership will be done through book entries on electronic ledgers. Transfer form sand transfer stamps will disappear.
National Stock Exchange
The National Stock Exchange is a computerized, floorless exchange leading to an openness which is lacking in the regional stock exchanges as no one knows while trading who is buying or selling what.
NAV
Net Asset Value, which is the value of total assets less liabilities on the date of valuation. It represents the net worth of the company. Mutual funds periodically publish he NAV of their units or shares; this is the market price on that particular date of the net assets (i.e., less all liabilities) of the fund, divided by the numbers of units or shares outstanding. The market price, however, may be more or less than the NAV. For funds which themselves redeem the units or shares, the redemption price is less than the NAV.
Negative Equity
An asset which has a lower market value than the sun borrowed to purchase it. The asset may have been acquired when prices were high.
Negative Net Worth
When a company has greater liabilities than assets it has a negative net worth.