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Finance GlossaryNaked Option
Naked Option
Definition of Naked Option
Naked Option refers to an options position where the seller does not hold the underlying asset or a hedging position. This exposes the trader to potentially unlimited losses if the market moves sharply against the position. Naked options are generally considered high risk and are used by experienced traders only.
Related Terms
Asset Allocation
Asset allocation is a strategy or method in which an investor decides how much money they should allocate to an investment based on their risk profile, financial goals, and other factors to maximize returns and minimize risk.
Capital Expenditure
Capital expenditure or CapEx is the amount of money a company spends on maintaining, upgrading, or buying new assets like machinery, equipment, property, and others.
Minority Interest
Minority Interest refers to the portion of a subsidiary’s equity that is owned by shareholders other than the parent company. It represents the non-controlling stake in the subsidiary’s profits and net assets. It is shown separately in consolidated financial statements to reflect ownership accurately.
Matching Orders
Matching Orders refers to the process by which a stock exchange pairs buy and sell orders, prioritising based on price and time (Price-Time Priority). If a buyer’s price matches a seller’s price (order matching), a trade is executed. This automated mechanism ensures fair, transparent, and efficient order execution in the market.
Book To Bill Ratio
Book to Bill ratio is the value you get by dividing the total worth of new orders received by the total worth of orders sold. The formula to calculate Book to Bill ratio is:
Book to Bill ratio: Total worth of new orders received / Total worth of orders billed
Book to Bill ratio helps companies understand the demand and supply for their goods or services. A Book to Bill ratio of more than 1 means that there’s more demand and less supply.
Whereas, a Book to Bill ratio of less than 1 means that there’s less demand and more supply. Using these indicators, the company can work on increasing or limiting production.
Book to Bill ratio: Total worth of new orders received / Total worth of orders billed
Book to Bill ratio helps companies understand the demand and supply for their goods or services. A Book to Bill ratio of more than 1 means that there’s more demand and less supply.
Whereas, a Book to Bill ratio of less than 1 means that there’s less demand and more supply. Using these indicators, the company can work on increasing or limiting production.
CANSLIM
CANSLIM is an acronym for a seven-step strategy to pick growth stocks by combining fundamental and technical analysis. Here’s the full form of CANSLIM:
- Current quarterly Earnings Per Share (EPS): compare this fundamental indicator with the same figure from the previous quarter. If the figure grows (by 20% or more as a rule of thumb), the company is fundamentally strong.
- Annual earnings: Compare this fundamental indicator from the previous years. If there’s year-on-year growth, the company is fundamentally strong. If the year-on-year growth is by 20-25%, even better.
- New product or service: strong companies continue to innovate. That’s what this letter is about - checking if the company is continuously launching new products, services, or holding events.
- Supply: a fundamentally strong business should have a good supply and demand when it comes to its goods, services, and stock. Executive supply of shares may reduce the value of the company - that’s why it should always be scarce in supply.
- Leader: the company should be a leader in its own right, either in or across industries.
- Institutional holding: a valuable company will have higher institutional ownership, the percentage of which should always be tracked.
- Market trend: an investor must check whether the company or stock is going or against the trend by comparing it to broader indices.
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