The financial world has developed a special investment-oriented language to help describe the stock market, investments, securities for the stock market, stock market analysis, and its conditions. At times you may be confronted with a term which is totally alien or has a completely different meaning from what you thought. Misunderstanding these terms can sometimes lead to the wrong conclusion, and that can cost you money!

What you don't know can hurt you.

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Naked Calls A form of option writing in which the investor sells a call against securities he doesn't own. This is one of the riskiest of market transactions, because the writer's risk is unlimited. If you do own the security, then you've written a ""covered call."" If you sold a naked call and the option owner exercised his right to buy the stock, you would be obligated to acquire the called shares in the open market at whatever price it was trading at. There is no limit to how high this price could go.   Naked Puts A form of option writing or selling in which the seller owns neither the underlying security nor a different option on that same security with the same (or later) expiration date and higher striking price. Writing naked puts is not recommended unless the seller has already decided that he would be willing to purchase the underlying security at the put strike price.   Negative Volume Index The Negative Volume Index (NVI) focuses on days when the volume decreases from the previous day. The usefulness of this index is based on the premise that ""smart money"" quietly takes positions on days when volume decreases. When volume increases, the crowd-following, ""uninformed"" investors are in the market. In his book Stock Market Logic, Norman Fosback points out that the odds of a bull market are 95 out of 100 when the NVI rises above its one-year moving average. The odds of a bull market are roughly 50/50 when the NVI is below its one-year average. Therefore, the NVI is most useful as a bull market indicator.   Net Asset Value (NAV) The current value of a share in a mutual fund. It's just the fund's assets minus liabilities divided by the number of outstanding shares. Most funds calculate their NAV after the close of trading each day. For conventional mutual funds, your share is worth the day's NAV, but in closed-end mutual funds, the NAV and the market price aren't usually the same. That's because closed-end fund shares trade like stocks, from investor to investor, and sell at a premium or discount to their NAV, depending on a variety of factors (such as transaction costs and investor expectations).   Net Assets This figure is recorded in millions of dollars and represents the fund's total asset base, net of fees and expenses.