Delta:
Measures the rate of change in an option's theoretical
value for a one-unit change in the underlying stock's
price. Calls have positive deltas and puts have negative
deltas. For example, a call option with a value of $2.50
and a delta of .25 would increase to $2.75 if the stock
price increased by $1.
Derivative / derivative security:
A financial security whose value is determined in part
from the value and characteristics of an underlying
security.
Diagonal spread:
A strategy involving the simultaneous purchase and writing
of two options of the same class and the same company but
have different strike prices and different expiration
dates. E.g.: Buying 1 July 50 call and writing 1 Jan 55
call.
Discount:
An adjective used to describe an option that is trading at
a price less than its intrinsic value (i.e., trading below
parity). Bonds may be purchased at a discount below their
redemption price. Bank notes may be purchased at a
discount whereby interest is deducted in advance.
Discount Rate:
The lending rate that the Federal Reserve Bank charges on
loans made to other banks and financial institutions.
Changes in this rate tend to have large ripple effects on
the rates banks in turn charge their customers. The bond
market and sometimes the stock market react sharply to
changes in this rate.
Discretion:
Freedom given by an investor through his or her Account
Executive to use judgment regarding the execution of an
order. Discretion can be limited, as in the case of a
limit order which gives the Floor Broker 1/8 or 1/4 point
from the stated limit price to use his or her judgment in
executing the order. Discretion can also be unlimited, as
in the security selected, number of shares, and whether to
buy or sell.
Distributions:
Capital gains, (long or short-term) interest or dividends
paid to bond holders and shareholders. These can be
received as cash or stock and they are treated as closed
lots for tax purposes. Return of capital is also a type of
distribution. Distributions from mutual fund shares are
easily reinvested into more shares and the compounding of
reinvested shares can add substantially to the cumulative
return of a fund.
Dividend:
The periodic, usually quarterly, payment made by a
corporation to its shareholders, generally expressed as
dividend per share. Dividends represent earnings that are
not reinvested by the corporation. Some stocks pay no
dividends and others, such as utility companies pay
substantial ones that represent a large portion of the
total return a shareholder will get from his investment.
Dividends are a type of distribution and are usually
taxable in year received.
Dividend Frequency:
Shows how often a given mutual fund or corporation pays a
dividend distribution.
Dividend Yield:
The annual rate of return earned by an investor on a
common or preferred stock calculated by dividing the
amount of annual dividends per share by the purchase price
of the stock.
Dow Jones Industrial Average 200-Day Moving Average:
This value is calculated by averaging all the closing
values of the DJIA for the last 200 days.
Dow Jones Industrial Average (DJIA):
The most commonly followed index of the U.S. stock market.
It is comprised of 30 corporations spanning many different
industries. It is price weighted, meaning that a $2 change
in a $100 per share stock will have a greater affect than
a $2 change in a $20 per share stock. The Dow Jones
Industrial Average measures the health and direction of
the stock market.
Dow Jones Transportation Average (DJTA):
An index of 20 corporations in the transportation sector,
including air, rail, and truck.
Dow Jones Utilities Average (DJUA):
An index of 15 major utility corporations.
Duration Of An Order:
It specifies whether a limit trade is Good 'till Canceled
or Day Only. Market orders all have duration of Day Only
by definition, since they are executed as soon as possible
at the market price. It is possible that a market order
could arrive after the market close, in which case, it may
remain valid at the next market opening.
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