Trading Glossary

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Day order

An order that is placed for execution, if possible, during only one trading session. If the order cannot be executed that day, it is automatically canceled.

Days Till Expiration

(DTE) The number of days between today and the day the contract expires. For most exchanges, this includes only trading days, but for some exchanges in Europe, it includes weekends and holidays. We follow the recommendations of the exchange itself when deciding whether or not to include weekends and holidays.

Day trading

Refers to establishing and liquidating the same position or positions within one day's trading.

Dealer

An entity that stands ready and willing to buy a security for its own account (at its bid price) or sell from its own account (at its ask price).

Dealer options

Over-the-counter options, such as those offered by government and mortgage backed securities dealers.

Debt instrument

An asset requiring fixed dollar payments, such as a government or corporate bond.

Debt market

The market for trading debt instruments.

Default risk

Also referred to as credit risk (as gauged by commercial rating companies), the risk that an issuer of a bond may be unable to make timely principal and interest payments.

Deferred futures

The most distant months of a futures contract. Related: Nearby deferred-interest bond. A bond that sells at a discount and does not pay interest for an initial period, typically from three to seven years. Compare step-up bond and payment-in-kind bond.

Delivery

The tender and receipt of an actual commodity or financial instrument in settlement of a futures contract.

Delivery notice

The written notice given by the seller of his intention to make delivery against an open, short futures position on a particular date. Related: Notice day

Delivery options

The options available to the seller of an interest rate futures contract, including the quality option, the timing option, and the wild card option. Delivery options make the buyer uncertain of which Treasury bond will be delivered or when it will be delivered.

Delivery points

Those points designated by futures exchanges at which the financial instrument or commodity covered by a futures contract may be delivered in fulfillment of such contract.

Delivery price

The price fixed by the Clearing house at which deliveries on futures are in invoiced; also the price at which the futures contract is settled when deliveries are made.

Delta

Also called the hedge ratio, the ratio of the change in price of a call option to the change in price of the underlying stock.

Derivative instruments

Contracts such as options and futures whose price is derived from the price of the underlying financial asset.

Derivative markets

Markets for derivative instruments.

Diffusion process

A conception of the way a stock's price changes that assumes that the price takes on all intermediate values.

Dime Rally

A sharp or brisk rise following a decline in the general price level of the market, or in an individual stock. Related: Rally

Dirty price

Related: Full price

Discount

Referring to the selling price of a bond, a price below its par value. Related: Premium

Discount rate

The interest rate that the Federal Reserve charges a bank to borrow funds when a bank is temporarily short of funds. Collateral is necessary to borrow, and such borrowing is quite limited because the Fed views it as a privilege to be used to meet short-term liquidity needs, and not a device to increase earnings.

Discretionary account

Accounts over which an individual or organization, other than the person in whose name the account is carried, exercises trading authority or control.

Diversifiable risk

Related: Unsystematic risk

Dividend rate

The fixed or floating rate paid on preferred stock base on par value.

Dividend yield

The cash yield of a stock or stock index, used in determining the net financing cost for a stock index future contract.

Dow Jones Industrial Average (DJIA)

Price-weighted average of 30 actively traded blue-chip stocks, traditionally of industrial companies.

DTE

Days Till Expiration, or the number of days between today and the day the contract expires. For most exchanges, this includes only trading days, but for some exchanges in Europe, it includes weekends and holidays. We follow the recommendations of the exchange itself when deciding whether or not to include weekends and holidays.

Dual-currency issues

Eurobonds that pay coupon interest in one currency but pay the principal in a different currency.

Duration

A common gauge of the price sensitivity of an asset or portfolio to a change in interest rates.

Dynamic asset allocation

An asset allocation strategy in which the asset mix is mechanistically shifted in response to changing market conditions, as in a portfolio insurance strategy, for example.

Dynamic hedging

A strategy that involves rebalancing hedge positions as market conditions change; a strategy that seeks to insure the value of a portfolio using a synthetic put option.