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Daily Range
The difference between the high and low price during one trading day.
Dated Date
The date from which accrued interest is calculated on new bonds and other debt instruments. The buyer pays the issuer an amount equal to the interest accrued from the dated date to the issue's settlement date. With the first interest payment on the bond, the buyer is reimbursed.
Day Order
Unless an investor specifies otherwise, an order to buy or sell a security will expire if not filled at the end of the day.
Day Trading
Refers to establishing and liquidating the same position or positions within one day's trading, thus ending the day with no established position in the market.
Debenture
Another word for a bond.
Debit Spread
The difference in value of two options, where the value of the long position exceeds the value of the short position.
Debt
Money borrowed from lenders for a variety of corporate or personal purposes. The borrower pays interest for the use of the money and is obligated to repay the principal amount on a set date.
Debt Financing
Raising money for working capital or for capital expenditures by selling bonds, bills or notes to individual or institutional investors. In return for the money lent, the individuals or institutions become creditors and receive a promise to repay principal and debt interest.
Debt Investment
A type of investment where the investor, in effect, lends money for a written promise to return the principal plus interest after an agreed period of time (e.g. term deposit).
Debt Issues
The issuance of bonds or other forms of debt on the public markets.
Debt Security
A security representing a loan by an investor to an issuer such as a corporation, municipality, the federal government or a federal agency. In return for the loan, the issuer promises to repay the debt on a specified date and to pay interest.
Debt Service
The schedule for repayment of interest and principal (or the scheduled sinking fund contribution) on an outstanding debt.
Deduction
An item or expenditure subtracted from adjusted gross income to reduce the amount of income subject to tax.
Deductive Logic
Logic traditionally used in expert systems, which defines a method for reasoning from the general to the specific.
Deep Discount Bond
A bond that sells for a discounted price of less than 80% of the face value of the bond.
Deep-in-the-Money
A deep-in-the-money call option has the strike price of the option well below the current price of the underlying instrument. A deep-in-the-money put option has the strike price of the option well above the current price of the underlying instrument.
Default
1. The failure to pay interest or principal promptly when due.
2. The failure to perform on a futures contract as required by an exchange.
Defensive Investment Strategy
A method of portfolio allocation and management aimed at minimizing the risk of losing principal. Defensive investors place a high percentage of their investible assets in bonds, cash equivalents and stocks that are less volatile than average.
Defensive Merger
A form of shark repellent: a strategic move by a takeover target company to make its stock less attractive to a potential acquirer. The defensive merger strategy is for the target company to combine with another corporation that would create antitrust or other regulatory problems if the original unwanted takeover proposal was consummated.
Defensive Stock
Stock of a company with continuous dividend payments, which has demonstrated relatively stable earnings despite poor economic conditions.
Deferred
Another term for "back months."
Deferred Annuity
An annuity contract that delays payments of income, installments or a lump sum until the investor elects to receive them.
Deferred Profit Sharing Plan (DPSP)
A plan where employers make cash contributions for employee' retirement plans out of business profits. The contributions and earnings accumulate tax-free until withdrawn.
Deferred Service Charge
Also known as Rear Load. These fees are associated with Mutual Funds. This type of fee is paid by a unit holder when whey sell the fund (unit). The fee declines in cost over time. For example, if you were to sell your units one day after buying them, the fee may be 6%. After one year it may decline to 5% and after six years the fee will be zero percent.
Deferred Taxes
A non-cash expense that provides a source of free cash flow. Amount allocated during the period to cover tax liabilities that have not yet been paid.
Deficiency Letter
A securities commission letter sent to a company that has submitted a preliminary prospectus on a planned new issue of the company's securities. The letter poses any questions the commission wants answered, and outlines any recommendations for changes to the prospectus. nWhen all points raised in the letter are resolved, the issue's final prospectus may be filed.
Deficit
A financial situation for an individual, company or government where expenses exceed income.
Deflationary
A term used to describe a situation where the general price level of goods and services is declining.
Degrees of Freedom
The number of independent observations; the number of observations minus the number of parameters to be estimated.
Delay
The amount of time that elapses between a change in an input event and the resultant change in a related output event or time series.
Delayed Time
Quotes from a data service provider that are delayed up to twenty minutes from real time quotes.
Delist
The removal of a security's listing on a stock exchange. This is done when the security no longer exists, the company is bankrupt, the public distribution of the security has dropped to an unacceptably low level, or the company has failed to comply with the terms of its listing agreement.
Delivery
Securities sellers must deliver the certificates on or before the third business day after the sale. Delayed delivery refers to a transaction in which there is a clear understanding that delivery of the securities involved will be delayed beyond this three day period.
Delivery Date
This is the third business day following a regular way transaction of stocks or bonds, or the first day of the month in which delivery is to be made under a futures contract. Futures Contract sales are made on a seller's option basis, therefore delivery can be on any day of the month as long as proper notice is given.
Delphi Forecast
A method of forecasting, also known as jury of executive opinion. A panel of experts, such as financial executives, prepares individual forecasts based on information provided to all members of the panel. Each expert then reviews the reports of the other experts, makes adjustments in their own report if they think that is justified. It is expected that the resulting composite forecast will be more accurate than the individual forecasts.
Delta
The amount by which the price of an option changes for every dollar move in the underlying instrument.
Delta-Hedged
An options strategy that protects an option against small price changes in the option's underlying instrument. These hedges are constructed by taking a position in the underlying instrument that is equal in magnitude but opposite in sign (+/-) to the option's delta.
Delta Neutral
This is an "options/options" or "options/underlying instrument" position constructed so that it is relatively insensitive to the price movement of the underlying instruments. This is arranged by selecting a calculated ratio of offsetting short and long positions.
Delta Position
A measure of option price vs. the underlying futures contract or stock price.
Demand
A consumer's desire and willingness to pay for a good or service.
Demand Aggregate
The Demand Aggregate is used similarly as the Demand Index but adds Open Interest as a consideration in the formula. In its simplest terms, the system confirms price trends by analyzing concurrent Volume and Open Interest trends. For example, a rise in price, coupled with rising Volume and Open Interest figures, is considered a bullish indicator. Interpretations are made with respect to the relationship between the movement of Volume, Open Interest, and Price.
Demand Index
The Demand Index is a leading indicator that combines volume and price data in such a way as to indicate a change in price trend. It is designed so that at the very least it is a coincidental indicator, never a lagging one. The calculation of this index is relatively complex. This analysis is based on the general observation that volume tends to peak before prices peak, both in the commodity and stock markets.
Density Function
For any measure "m," a function that gives rise to "m" when integrated with respect to some other specified measure. A probability density function is a function whose integral over any set gives the probability that a random variable has values in this set.
Dependence
A relationship between two different experimental results in which the first result does not directly influence the chances of the second result occurring, but instead, the two results are indirectly related because they are subject to influences from a common outside factor.
Depletion
Refers to the consumption of natural resources which are part of a company's assets. Since oil, mining and gas companies deal in products that cannot be replenished, depletion reduces the company's natural assets over a specified time period. The recording of depletion is a bookkeeping entry similar to depreciation and does not involve the expenditure of cash.
Depreciation
1. A tax deduction that compensates a business for the cost of certain tangible assets.
2. A decrease in the value of a particular currency relative to other currencies.
Derivative Security
A financial security, such as an option, or future, whose value is derived in part from the value and characteristics of another security, the underlying security.
Deterministic
Known in advance when the sum of one-step ahead forecast mean squared errors is zero. The fundamental continuous effect of an exogenous variable such as money supply that can be determined to be explanatory.
Deterministic System
A system in which the outcome is determined by an equation; a system in which cause and effect is easily determined.
Detrend
To remove the general drift, tendency, or bent of a set of statistical data as related to time. Detrend is simply another interpretation of a moving average. It provides a means of identifying underlying cycles not apparent when the moving average is viewed in its original form by effectively hiding the major cycles from view. The moving average line is drawn as a straight, horizontal basis line on the detrend chart. Price bars are then re-positioned along this line depending on their relation to the moving average line.
Diagonal Spread
A two-sided spread consisting of options at different exercises and with different expiration dates. These options must be of the same type and have the same underlying.
Difference from S&P
A mutual fund's return minus the change in the Standard & Poors 500 Index for the same time period. A notation of -5.00 means the fund return was 5 percentage points less than the gain in the S&P, while 0.00 means that the fund and the S&P had the same return.
Difference-in-Means Test
A statistical test that indicates the likelihood of observing the difference if the true difference were zero. A large value of this statistic leads to non-acceptance of the null hypothesis that the true difference is zero.
Differencing
Subtracting previous from current values to obtain a stationary (detrended) time series:
Diffusion Equation
A partial differential equation, used in solving a random walk problem.
Diffusion Index
An index that measures the percentage of individual series that are positive compared with the aggregate group that is, the percentage of S&P groups that is above their 30-week moving average.
Directional Movement Index
Directional Movement uses a rather complicated set of calculations designed to rate the directional movement of commodities or stocks on a scale from 0 to 100. For those traders who employ trend-following methods, commodities or stocks rating in the upper end of the scale would-be attractive. Those using non-trending methods, commodities or stocks rating at the lower end of the scale should be considered for trading.
Devaluation
A substantial fall in the value of a currency as compared to the value of gold or to the value of another country's currency.
Dilution
A reduction in earnings per share of common stock. Dilution occurs through the issuance of additional shares of common stock and the conversion of convertible securities.
Direct or Indirect Holdings
The holdings of an individual or company in other companies.
Director
Person elected by voting common shareholders at the annual meeting to direct company policies.
Disaster Out Clause
A clause in an underwriting agreement allowing the underwriter to cancel the agreement, should a law, event or major financial occurrence transpire that adversely affects financial markets.
Disclaimer Clause
Securities commissions require that all prospectuses carry a disclaimer on the front page stating that the securities commission itself has in no way approved the merits of the securities being offered for sale.
Discount
The difference between the lower price paid for a security and the security's face amount at issue.
Discount Bond
Bond sold at a discount from face value. Part of the yield investors receive from holding such bonds does not come from interest payments but from capital gains that accrue because of the discount.
Discount Brokers
Brokerage firms that offer lower commission rates than investment dealers, but do not offer the services that investment dealers do, such as advice, research and portfolio planning.
Discount Factoring
An arrangement whereby the seller receives funds from the factor prior to the average maturity date, based upon the invoice amount of the receivable, less cash discounts. Allowance for estimated claims, returns, etc. The factor is compensated by an interest rate based on daily balances and typically 2% to 3% above the bank prime rate.
Discount Rate
The interest rate charged by the twelve Federal Reserve Banks for short-term loans made to member banks.
Discounted
When some anticipated event such as increased dividends or lower earnings has already been reflected in the market price of a stock, it is said to be "already discounted" by the market.
Discretionary Account
A type of account where you give some the broker some control over purchase and sale of securities on your behalf, without you having to approve each order. This should be done if you really trust your broker as discretionary powers can lead to abuses.
Disposable Income (DI)
The sum that people divide between spending and personal savings.
Distributions
Payments to shareholders of income realized by the Fund. Distributions can comprise interest, dividends or capital gains. The type and frequency of the distribution is dependent on the fund. Generally, distributions comprise only the "taxable income" of the fund. Fund distributions can be made by check or by investing in additional shares.
Distribution Spread
Any set of related values described by an average (that is, mean), which identifies its midpoint, a measure of spread (that is, standard distribution) and a measure of its shape (that is, skew or kurtosis).
Divergence
When two or more averages or indices fail to show confirming trends.
Diversification
A risk management technique that mixes a wide variety of investments within a portfolio, thus minimizing the impact of any one security on overall portfolio performance and reducing the overall risk.
Diversified Common Stock Fund
A mutual fund that invests its assets in a wide range of common stocks. The fund's objectives may be growth, income or a combination of both. (See also: Growth Fund, Mutual Fund)
Diversified Portfolio
A portfolio consisting of many different investments in different sectors. This approach is used to decrease your portfolio risk.
Dividend
When companies pay part of their profits to shareholders, those profits are called dividends. A mutual fund's dividend is money paid to shareholders that comes from the investment income the fund has earned. This amount is announced before it is paid and is distributed to shareholders of record on a per share basis. Dividends may be in the form of cash, stock or property. All dividends must be declared by the board of directors.
Dividend Reinvestment Plans (DRP)
Plans offered by many corporations for the reinvestment of dividends, sometimes at a discount from market price, on the dividend payment date. Many DRP's also allow the investment of additional cash from the shareholder. The DRP is usually administered by the company without charges to the holder.
Dividend Yield (Funds)
Indicated Yield represents return on a share of a mutual fund held over the past 12 months. Assumes fund was purchased 1 year ago. Reflects effect of sales charges (at current rates), but not redemption charges.
Dividends Per Share
Dividends paid for the past 12 months divided by the number of common shares outstanding, as reported by a company. The number of shares often is determined by a weighted average of shares outstanding over the reporting term.
Doji
A session in which the open and close are the same (or almost the same). Different varieties of doji lines (such as a gravestone or long-legged doji) depend on where the opening and close are in relation to the entire range. Doji lines are among the most important individual candlestick lines. They are also components of important candlestick patterns.
Double Auction System
In the securities sector, the phrase double auction system is used because auction markets consist of many buyers and many sellers as opposed to traditional auctions where there are many buyers but usually only one seller.
Double Bottom (Top)
The price action of a security or market average where it has declined (advanced) two times to the same approximate level, indicating the existence of a support (resistance) level and a possibility that the downward (upward) trend has ended.
Double-Smoothed
A price series that has been smoothed by a mathematical technique such as a moving average. This first series of smoothed price data is then smoothed a second time.
Dow Jones Averages
The most widely quoted and oldest measures of change in stock prices. Each of the four averages is based on the prices of a limited number of stocks in a particular category.
Dow Jones Industrial Average (DJIA)
An average made up of 30 blue chip stocks that trade daily on the New York Stock Exchange. The DJIA is used as an overall indicator of market performance although criticism is periodically raised over how it is calculated, as well as the fact that so few companies are included so that it may not be a truly representative indicator of market activity.
Dow Jones Transportation Average
Similar to the Dow Jones Industrial Average, this average is made up of 20 transportation stocks that trade daily on the New York Stock Exchange.
Downgrade
A classic negative change in ratings for a stock, and or other rated security.
Downside
The potential for prices to move down. Also, the potential risk one takes for directional trading.
Dow Theory
A theory of market analysis based upon the performance of the Dow Jones Industrial and Transportation Averages. The theory is that the market is in a basic upward trend if one of these averages advances above a previous important high, accompanied or followed by a similar advance in the other. When both averages dip below previous important lows, this is regarded as confirmation of a basic downward trend.
Drawdown
The reduction in account equity as a result of a trade or series of trades.
Durbin-Watson Statistic
The probability that first order correlation exists. With a range between zero and 4, the closer to 2.0, the lower the probability is.
Dynamic Data Exchange
Ability to automatically update an application from within another application.
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