Trading Terms Starting With D

  • DAX

    a capitalization-weighted index that represents the 30 largest German companies, in terms of order book volume and market capitalization, traded on the Frankfurt Stock Exchange.
  • Day order

    an order to buy or sell a security with instructions to cancel any portion not executed by the end of the day the order is entered. All orders are considered day orders unless otherwise specified.
  • Day trade

    to open and close the same security position on the same trading day.
  • Day trader

    a stock or options trader who opens and closes the same position on the same day, holding the positions from minutes to hours.
  • Dealer market

    an electronic network of dealers who buy and sell securities for themselves as well as for customers. Each listed security is assigned multiple dealers who compete with each other in making bid and ask prices, and provide market liquidity by maintaining and trading out of their own inventories. A primary benefit of this system is speed of order execution.
  • Debenture

    an unsecured debt obligation issued by a corporation to raise capital. These bonds or notes are generally long-term, backed only by the issuing company's integrity and creditworthiness, and may be convertible into common shares. Most corporate bonds issued in the U.S. are this type.
  • Debit

    any cash paid out of an account for the purchase of an option or stock position that results in decrease in the cash balance.
  • Debit spread

    an option strategy involving multiple parts (legs) in which the total cash amount paid is greater than the total cash amount received. The result is a net decrease in the cash balance of an account. Can be done with calls or puts.
  • Debt

    money borrowed with an obligation to repay. The borrower, the one who owes money, is commonly referred to as the "debtor," and the lender is referred to as the "creditor." A mortgage and a car loan are two commonplace forms of personal debt. Governments and companies borrow money routinely, and when they turn to the investing public to borrow, they issue debt instruments, or debt securities, in return. These may take the form of notes, debentures, commercial paper and various kinds of bonds, and they may or may not be secured or collateralized with an asset. These securities all imply an intent to repay the amount borrowed, (face value) to the investors who buy them, on or before a certain date, the maturity date. In return the investors will generally be paid interest at a specified rate. Companies borrow money for conducting business and growth.
  • Debt security

    an instrument that is issued to represent borrowed funds that are to be repaid. It may be in the form of a note, debenture, bill, bond or commercial paper. Also termed Fixed income security. See also Debt.
  • Debt to equity ratio

    used in fundamental analysis, it is ratio calculated by dividing a company's long-term debt by common shareholders' equity. It measures the extent to which a company is financed by credit, or leveraged.
  • Debtor

    an individual, company or government who has borrowed and owes money.
  • Decile ranking

    a system commonly used to rank investments, like mutual funds, according to their return over a period of time. It assigns ranks on a 1 to 10 scale, with 1 being the best and 10 the worst, with each scale number representing 10% of the funds being compared. A ranking of 1 would mean the fund's return is in the top 10%, 2 would mean the top 20%, and so on down to 10 which would mean the bottom 10%.
  • Declaration date

    the day on which a company's board of directors announces the date and amount of the next dividend payment. From this day forward the dividend is considered declared.
  • Deep in-the-money

    a call or put option that is in-the-money by a significant amount. This is an arbitrary term; from investor to investor the word "significant" will have a different connotation.
  • Default

    failure to meet the terms of a credit agreement. For an individual this might include failure to make mortgage, car or credit payments. For a corporate or governmental issuer of a debt security this might mean failure to pay interest on a specified schedule, or at maturity failure to repay the principal. In any case, the individual or institution not meeting a credit obligation is considered in default
  • Default risk

    the risk that a corporate or governmental issuer of a debt security might fail to pay interest on a specified schedule, or fail to repay the principal at maturity. Also termed Credit risk.
  • Defensive portfolio

    portfolio whose assets are allocated to minimize the risk of losing investment principal. Investment capital is concentrated in fixed income instruments, cash or cash equivalents and defensive stocks.
  • Defensive stock

    hares issued by a company whose earnings remain stable, and whose dividend payments are reliable, regardless of business and economic cycles. These stocks tend to underperform, or lag behind, the broader market during periods of economic expansion because of the more stable demand for their goods and services: food and beverage, tobacco, nondurable household products, personal products, pharmaceuticals and utilities.
  • Deficit

    the amount by which a sum of money is less than the required amount. With respect to local, state or federal government budgets, a deficit occurs when revenue coming in fails to cover expenditures. When the monetary value of imports entering a country exceeds the value of exports, a trade deficit results.
  • Defined benefit plan

    a pension plan that obliges an employer to make specified dollar payments to a qualified employee upon retirement. Contributions to the plan may be made by the employer, the employee or both. However, by agreeing to pay out the defined benefit amount the employer assumes the risks of the plan's investments, with subsequent gains or losses not affecting the benefit. The dollar amount paid to the employee is based on his or her salary history, years of service and age at retirement, and becomes the employer's debt obligation.
  • Defined contribution plan

    a pension plan in which the retirement benefit is determined by how much is contributed to the plan, how it is invested, and the return on that investment. There is no way to estimate in advance how much the plan will provide at retirement. Cash contributions may be made by the employer, the employee (through salary deferral), or both, but any contributions coming from the employer will represent the extent of the employer's commitment to the employee's retirement income. In a defined contribution plan, investment risk and investment reward is assumed by the employee. Examples of this type of plan in the U.S. include Individual Retirement Accounts (IRAs) and 401 (k) plans.
  • Deflation

    opposite of inflation. It is characterized by a decrease in the money supply and/or credit, a decline in the price of goods and services and increased unemployment. Deflation occurs when the annual inflation rate falls below zero percent.
  • Delayed opening

    when a particular stock does not open for trading with the rest of the marketplace due to unusual circumstances. These may include: an earlier corporate announcement that could significantly impact the stock's price; public knowledge that a corporate announcement is imminent; a serious imbalance in buy and sell orders for any reason.
  • Delist

    to disqualify a company's stock from trading on a particular securities exchange and to remove it from that exchange's list of traded stocks. This may occur for a variety of practical or regulatory reasons. For a stock to become or remain listed it must meet an exchange's minimum requirements with respect to such things as market capitalization, stock price, trading volume and number of shares outstanding. There are also certain financial requirements that the stock issuer must meet. Other reasons for delisting include a merger or takeover, bankruptcy or liquidation.
  • Delivery

    the tender and receipt of shares, the actual commodity, the cash value of a commodity, or of a delivery instrument (warehouse receipt or shipping certificates) in settlement of an options or futures contract. Futures trading is not currently available at TradeKing.
  • Delivery month

    the month in which a futures contract expires and delivery of the underlying must be made. Futures trading is not currently available at TradeKing.
  • Delivery notice

    notification of delivery to settle a futures contract in the form of a written notice from a futures contract seller through the clearinghouse to the buyer. Futures trading is not currently available at TradeKing.
  • Delta

    one of the Greeks derived from a pricing model, it is the amount an option's theoretical value will change for a corresponding one-unit (point or dollar) change in the price of the underlying stock (equity option), or value of the underlying index (index option).
  • Delta neutral trade

    any trade involving a combination of options, or options and stock, in which the net positive and negative deltas balance each other out and are close to zero.
  • Depreciation

    with respect to an asset, a noncash expense reducing its value due to usage or passage of time. With respect to currency in a floating exchange rate system, the reduction in the value of a country's currency in relation to other currencies as driven by supply and demand.
  • Depth of market

    one measure of liquidity, the size of a single trade needed to change a stock's price in the marketplace.
  • Deregulation

    the reduction or simplification of government rules and regulations that constrain market forces, and that in theory would lead to a more efficient marketplace.
  • Derivative

    a financial instrument whose characteristics and market value is determined in part from the value of another instrument, often termed the underlying.
  • Devaluation

    within a fixed exchange rate system, an official reduction in the value of a country's currency with respect to other currencies, initiated by the devaluing country's monetary authority (e.g., central bank).
  • Diagonal spread

    an option strategy established by purchasing and writing call options or put options on the same underlying with different strike prices and different expiration months. The short (written) options expire before the long purchased ones. Profit and loss potential are both limited but may be substantial depending on the intervals (difference) between the strike prices.
  • DIAMONDS® (DIA)

    shares in an exchange traded fund designed to track the performance of the Dow Jones Industrial AverageSM . The fund holds a basket of shares from of each of the average's 30 component stocks.
  • Diluted earnings per share (diluted EPS)

    a hypothetical earnings per share (EPS) calculation that assumes common shares are fully diluted, .e.g., all convertible securities have been converted into common shares and all employee stock options exercised. For companies with large numbers of convertibles and options outstanding, diluted EPS serves as a more accurate metric of a company's earning power than unadjusted EPS.
  • Dilution

    the effect on existing shares of common stock by a company's issue of additional common shares. These additional shares may result from: a secondary market offering; the conversion of convertible securities into common shares; employee exercise of stock options; merger with another company. Such a dilution may negatively impact certain per share ratios for existing common stock: percentage of equity ownership; earnings; voting control; book value.
  • Direct Participation Program (DPP)

    a financial security that allows an investor to directly participate in the cash flow and tax benefits associated with the company that issues the security, often through a limited partnership. This is typically a passive investment.
  • Discount bond

    a bond that is purchased below face value, or below par, but may be redeemed for full face value at maturity. If the bond carries no coupon it is called a zero-coupon bond.
  • Discount rate

    the rate at which a member bank may borrow short term funds directly from the Federal Reserve Bank, loans that are only for the short term and must be collateralized. The discount rate is the base interest rate for most consumer loans because private banks use it as a benchmark for interest they charge on loans they make to their own customers.
  • Discretion / discretionary order

    a buy or sell order providing a broker the authority and flexibility to execute the order based on the broker's best judgment with respect to price and timing. TradeKing does not accept discretionary orders.
  • Divergence

    with respect to technical analysis, when an asset and a reliable technical indicator fail to show confirming trends.
  • Diversification

    a strategy designed to reduce a portfolio's overall risk by spreading its exposure among asset classes like equities, debt and cash, and within those classes among a range of investment types from different markets and/or industry sectors. Each investment has its own risk vs. reward characteristics. Spreading both capital and risk in such a way reduces the risk inherent in any one investment, and increases the possibility of making a profit, or at least avoiding a loss.
  • Dividend / dividend yield

    a payment, usually cash, made to stockholders out of a company's profits, and generally on a regular basis such as quarterly. The dividend yield is the annual percentage return for a stock's dividend compared to its trading price (dividend total paid in a year divided by the stock's price when yield is calculated).
  • Dividend reinvestment plan (DRP or DRIP)

    a plan offered by many companies to their shareholders that provides for the automatic reinvestment of regular cash dividends or capital gains distributions in additional shares of stock. This service is available at TradeKing for many securities.
  • Dogs of the Dow

    an investment routine that involves buying equal dollar amounts of the ten component stocks of the Dow Jones Industrial Average with the highest dividend yield. The portfolio is held for one year (tax reasons), then adjusted the as needed to account for changing dividend yields.
  • Domicile

    a person's place of permanent residence, for tax purposes.
  • Dow Jones Industrial AverageSM (DJIA)

    a price-weighted index composed of 30 blue chip stocks which are among the largest and most widely held public companies in the U.S. The DJIA aims to provide a clear, straightforward view of the U.S. stock market and, by extension, the U.S. economy. Also termed Dow Jones, Dow 30 or Dow. See also Price-weighted index.
  • Downgrade

    a negative change in rating for a stock or a bond.
  • Downtick

    occurs when a security trades at a price less than the preceding trade. Opposite of Uptick. Also termed Minus tick.
  • Downtrend

    downward movement in the price of a security or broader market. Opposite of Uptrend.
  • Durable goods

    non-perishable products that aren't consumed or quickly disposed of, whose intended lifespan is three years or more. Some of these are raw products from which a wide variety of end-user consumer goods are made: steel, paper, autos and construction equipment. Also termed Hard goods.
  • Duration

    the change in the value of a fixed income security that will result from a 1% change in interest rates. Duration is stated in years.