Glossary terms beginning with D

Daily

The daily pattern (see abbreviations) indicating an interday trend.

Day Traders

Traders who take positions in the market and then liquidate them prior to the close of the trading day.

Dealer Option

A put or call on a physical commodity, not originating on or subject to the rules of an exchange, written by a firm which deals in the underlying cash commodity.

Debit Balance

Accounting condition where the trading losses in a customer’s account exceed the amount of equity in the customer’s account.

Debit

A sum owed.

Deck

All of the unexecuted orders in a floor broker’s possession.

Deferred Delivery

The distant delivery months in which futures or options trading is taking place, as distinguished from the nearby futures delivery month.

Delivery date

The date on which a financial instrument is to be/have been delivered/received.

Delivery Month

A calendar month during which a futures or options contract matures and becomes deliverable.

Delivery Notice

Notice from the clearinghouse of a seller’s intention to deliver the physical commodity against a short futures position; it precedes and is distinct from the warehouse receipt or shipping certificate, which is the instrument of transfer of ownership.

Delivery Points

Those locations designated by commodity exchanges at which stocks of a commodity represented by a futures contract may be delivered in fulfillment of the contract.

Delivery Price

The official settlement price of the trading session during which the buyer of futures contracts receives, through the clearinghouse, a notice of the seller’s intention to deliver and the price at which the buyer must pay for the commodities represented by the futures contract.

Delivery risk

In all foreign currency transactions there is a delivery risk between currency settlement hours outside the country involved, and the actual settlement hours in the country of the currency.

Delivery

The tender and receipt of an actual cash commodity or warehouse receipt or other negotiable instrument covering such market, in settlement of a futures contract or other forward financial transaction.

Delta hedge

The partial offset of the exchange risk of a currency option by an opposite open currency spot position in the same foreign currency.

Delta

A measure of the relationship between an option price and its underlying futures contract or stock price. Delta measures how rapidly the value of an option moves in relation to the underlying value. It is the change in an option's price divided by the change in the price of the underlying instrument. An option whose price changes by $1 for every $2 change in the price of the underlying instrument, has a delta of 0.5.

Discount

(1) A downward adjustment in price allowed for delivery of stocks of a commodity of lesser than deliverable grade against a futures contract. (2) Sometimes used to refer to the price difference between futures of different delivery months, as in the phrase “July at a discount to May,” indicating that the price of the July future is lower than that of the May. (3) In general, the amount by which one market price is less than another.

Discretionary Account

An arrangement by which the holder of the account gives written power of attorney to another, often a broker, to make buying and selling decisions without notification to the holder; often referred to as a managed account or controlled account.

Debenture Bond

A debt issue by a corporation and backed by the good name of the company.

Debit Spread (also Limit/Debit)

A trade that decreases the cash balance of an account because the cost of the options purchased (long position) exceeds the proceeds from the sale of short options. Bull call spreads and bear put spreads are examples of debit spreads.

Debt/Equity Ratio

A measure of a company's leverage, calculated by dividing long-term debt by common shareholders' equity, commonly using the data from the previous fiscal year.

Decay

Also known as time decay. The way in which the theoretical value of an option decreases as time passes. The specific measurement of the option's change in value over time is represented by the Greek letter theta. The rate at which an option loses its value increases more rapidly during the final 30 days of an option's life.

Diagonal Spread

A position in which the trader buys and sells options with different strike prices and expirations. For example, a diagonal spread could be created by buying one July 75 call and selling one June 70 call.

DIAMONDs

Shares in an ETF, Diamonds Trust Series I, that track the Dow Jones Industrial Average. The fund is structured as a unit investment trust.

Dividend Rate

The fixed or adjustable rate paid on common stock or preferred stock.

Dow Jones Industrial Average (DJIA)

The oldest and most widely known index of the U.S. stock market, the Dow represents the price movements of the 30 companies that, in the opinion of the editors of The Wall Street Journal, most represent the American economy.

Downtick

When the most recent trade for a particular instrument occurs at a lower price than the trade immediately preceding it.

DMI-

Measures the downward movement of a market. Many analysts believe an indication of a bullish market occurs when the DMI- crosses under the DMI+. This signals an opportunity to establish a long position. Conversely, an indication of a bearish market occurs when the DMI- crosses above the DM+-. This provides an opportunity to establish a short position and/or liquidate any existing long positions.

DMI+

Measures the downward movement of a market. Many analysts believe an indication of a bullish market occurs when the DMI+ crosses under the DMI-. This signals an opportunity to establish a long position. Conversely, an indication of a bearish market occurs when the DMI+ crosses below the DMI-. This provides an opportunity to establish a short position and/or liquidate any existing long positions.

Day Trade

The purchase and sale of a futures or an options contract in the same day, thus ending the day with no established position in the market or being flat.

Derivative

A type of investment whose value depends on the value of other investments, indices or assets. Futures contracts and futures options are common types of derivatives.

Day Order

An order that if not executed expires automatically at the end of the trading session of the day it was entered.